Dell's Dirty Laundry (DELL)

| About: Dell Inc. (DELL)

A few weeks ago, we made the following comment about Dell (NASDAQ:DELL): "In the end, the proclamations of $100 billion in sales and strong growth in emerging markets has not moved the Dell stock, nor are they likely to. At least until Dell can show that the horde of competitors chasing it are merely pretenders." Well, last night the horde caught up to Dell.

Revenue for the company's F1Q 07 (ended the beginning of May) will be $14.2 billion. That's the low end of guidance. EPS will be $.33, not in the range of $.36 to $.38 the company had given out before. The reason given was "pricing decisions". In other words, the competition squeezed Dell's margins by keeping prices low and forcing Dell to do the same.

The press was unkind:

Wall Street Journal: "Dell's Doldrums"

: "Dell is facing stepped-up competition from Hewlett-Packard (NYSE:HPQ) especially in the markets for corporate servers and low-cost consumer PCs. While Dell's worldwide PC shipments rose 10% in the first calendar quarter from a year ago, its share of the market fell slightly while H-P's share rose, according to the research firm Gartner Inc."
: "Dell Gets Its Bell Rung" and "Dell Delivers A Downer"

Dell's stock lost 6% after hours and hit $24.84, below the 52-week nadir of $25.10.

There is now more and more evidence that Dell's high-growth days are behind it. The goal of being a $100 million company someday no longer makes sense to investors; it is almost an embarrassment.

With a market cap of $60 billion and about $9 billion of cash and equivalents on the balance sheet, an aggressive M&A program may be the only option for getting the top line moving again. Gateway (GTW) might be for sale. By the way, Lenovo's stock is down from 3.9 in November to 2.875 yesterday in Hong Kong.

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Tagged: , Personal Computers
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