Today Dell (DELL) shareholders are going to "party like it's 2009." The stock is going to take a pounding, and will start trade at about $13/share, a price not seen since the market's bottom in early 2009.
How bad is it? Well, if you took a flyer on Ford (F) back then, you're up 400%. For Dell, you're still ahead 30%, but your prospects are bleaker than that.
Full disclosure. I took that flyer on Ford. I also bought some Dell around the same time. I sold it later and broke even. I'm thankful for that.
That's because tech stocks, unlike most industrials, do disappear when they lose the market plot. Silicon Graphics Inc. used to be a high-flyer. So, once, was Wang Labs. And Digital Equipment. When the mighty fall, they can fall all the way.
Dell is falling right now because of a first-quarter earnings miss and a negative outlook for the second quarter. They had all sorts of interesting excuses, including the Indian rupee. And, of course, the iPad.
But Dell's problem is fundamental. Its business model is broken. Has been for years.
Dell built its reputation in the 1990s with mass customization, with just-in-time manufacturing. Knowing that the value of components falls like rotting fruit on a dock, it bought just what it needed to make each PC, made each PC to order, and so guaranteed itself both margins and the best prices.
But that's buggy whip thinking. PCs are now devices, they're consumer electronics, and $500 is a premium price. Moore's Law has caught up with Dell.
Michael Dell knows this. He has been making acquisitions for years aiming to find a new game that Dell could dominate. He bought Perot Systems to dominate enterprise planning. He bought Alienware to dominate gaming. SonicWall and Wyse are part of its growing software portfolio. He even has a cloud strategy. And he likes open source.
Dell is dancing as fast as he can. But it's the old razzle-dazzle.
There is nothing special about Dell, and what was special is now gone. The stock is worth less-and-less as an acquisition currency and while the balance sheet still shows almost $13 billion in cash, that's less than one-quarter's revenue. (Tech companies always hold more cash than other firms for just such lean times.)
The clock, in short, is ticking. The plane is sputtering in. I've seen this story before.
It does not end happily.