CRAMER on Dell this morning:
Following a Bouncing Ball in a
Game That Never Ends
By James J. Cramer
2/14/99 12:18 AM ET
The sheer number of variables that go into a stock's price
move defies the odds-makers daily.
Let's take a day's worth of Intel (INTC:Nasdaq) trading. I
came in long Intel on Friday. We had heard the Intel
presentation earlier in the week, had dinner with Intel and
had checked in with virtually every Intel analyst all week to
be sure that Intel wasn't going to be hurt by the low-end
price war.
On Thursday, Mark Edelstone, the incredibly influential chip
analyst from Morgan Stanley Dean Witter squawked that
he liked Intel very much at the $131 level, which juiced the
stock -- and us -- into taking some more Intel.
We figured that Edelstone, a numbers guy, had a good take
on how the first quarter is cooking. Edelstone's comments
were verified repeatedly during multiple sessions with other
tech companies at the important Goldman conference.
Then the world turned upside down Friday. A First Call
note, put up overnight, from Dan Niles at Robertson
Stephens, called Dell's (DELL:Nasdaq) revenue numbers
into question.
No matter that Niles hasn't been a bull on Dell, the
computer company reports this week, and it was too close
to that report date to refute Niles' call with any authority.
The company can't announce the day before it is due to
report just to try to deal with Niles' call (although I
remember before Cabletron (CS:NYSE) became an
also-ran, it did this a couple of times when the bears had it
on the ropes.)
So the silence was defeaning. The stock tumbled from the
get-go. Of course, if Dell goes down, so goes Intel. It does
so regardless of what it said just the other day.
I tried to off-load the Intel I had bought on Edelstone's call at
the opening. The start of the market on Friday was weird.
As it was clear that Dell would color everything, the tech
world was surprisingly upbeat at 9:30. In fact, the first thing
that happened was that Microsoft (MSFT:Nasdaq) rallied. I
sold some Intel but then kept some back because of the
Soft rally.
The rally in Mister Softee was incredibly visible at 9:35 a.m.
as the 163 bid kept growing and then people started taking
163.25 stock. I know I started screaming to Jeff Berkowitz,
my partner, "What am I missing? What am I missing?" as if
I were going left when everyone was going right. I stopped
selling everything else I was trying to kick out.
"Did the government screw up?" I continued. "I thought the
government was starting to do better, looking like a win for
the Feds. Maybe we are wrong on this Dell impact call.
Maybe it's not that important." Finally, Jeff shut me up with
" 'Soft is wrong. 'Soft's a false tell. We gotta go some 'Soft
and 'Tel."
It shook me out of my reverie, and I immediately blasted out
of my trading stock in both of them. 'Soft kept climbing for
another five or ten minutes, and then it and Intel began their
long dives. They never reversed course for the rest of the
day.
The funny thing about a potential Dell shortfall is that a
slowdown in revenues literally impacts just about every
aspect of the personal-computer business -- that' s how big
Dell is now.
So at what level do you buy back your Intel if at all,
especially if you believe, as I do, that all of the negatives
about Dell are probably overblown at this point ?
One by one, the adherents of Dell "reiterated" their buys,
but to no avail. So throughout the midday, it dragged along
Intel with it, right through the impeachment proceedings.
Then at 2 p.m. word swept the Street that Tom Kurlak had
quit Merrill to go to Tiger, the giant hedge fund. There was
a time when Kurlak's name was synonymous with Intel, and
I would have blown out a ton of the chipmaker's stock if we
had still been in that mode.
But Tom missed this move -- weirdly he will be known by
newbies as the man who missed this move, as opposed to
the man I know who pioneered the notion that Intel was a
great manufacturer, that transcended the simple notion of
boom-bust p.c. technology. Oddly, the man who made Intel
a mainstream core holding had no impact, or even a ripple,
on the market now that he is moving to my side of the
Street.
As Intel headed to $126 I bought some of my stock back,
on the assumption that cooler heads would prevail Tuesday.
I recall that even in the horrendous selling earlier in the
week Intel held the $122 level, and it was still above that. I
would have bought more, but I am just plain scared of these
mirror NDX mutual funds that accentuate the direction of
the NDX. Intel is such a huge part of the NDX, that it would
be suicidal on a down day now to go in at any time other
than 3:59, when the NDX is down, because these
manipulators will just nail you with their selling.
There was also no hurry because Intel is now such a huge
part of the S&P 500 that you have to worry about sell
programs taking money out of stock and into bonds --
especially with bonds in a freefall as they were on Friday.
Not surprisingly, as Dell kept going lower and NDX funds
did their dirty deeds, the close of Intel was downright nasty.
It did not matter that Intel, in this very week, had spoken
and spoken positively. In the end, this stock was held
hostage to much larger variables, and on Friday those
variables were all flashing negative.
Fortunately, with Intel, we won't have to wait long to see if
we can buy again. Both Dell and Hewlett-Packard
(HWP:NYSE) report this week, and these stocks will set
the chipmaker's equity in motion again.
That's what makes this game so great: It never ends.
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