An article in Saturday's Barron's (reg. req.) won't do much to bolster Dell's beaten-down stock on Monday. Excerpts:
A single-quarter miss could be forgiven. But Dell's revenue growth has now slowed for seven quarters in a row and, worse, this will be the fourth consecutive quarter that Dell has missed the market's estimates... The problem for Dell is that, in the U.S. market, Dell's not the problem. Corporate PC sales, which account for maybe 85% of demand, continue to grow, at an unexciting pace. On the consumer side, Dell's unit sales continue to grow at a slightly faster clip than the market as a whole, which according to both IDC and Gartner is rising at around 11% a year. But for over a year now, the biggest and fastest growing sector has been basic PCs that list at $300 to $400. Though Dell's super-efficient direct-sales business model allows it to make money where many others can't, at ever-decreasing prices, revenue growth is slow and the profit can be measured in pennies. In short, while Dell may be selling more, it is earning less revenue and less profit from each one...
"The PC business is no longer a growth market, for Dell or for anyone else, and it never again will be," says John Enck of the Gartner Group. "There is no conceivable way that Dell can significantly outgrow the market as a whole and there is no way that the company can ever return its growth to the high levels of yesteryear."...
At the stock's current price, there are still more than a few die-hard fans. They argue that if there was ever a company capable of masterminding a return to growth, it's Dell. That's probably true, but it's no longer enough. If Dell's revenue fails to grow faster, and certainly if the company continues to miss earnings targets, it will be time to admit that Dell is past its best.
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