Dell shares fall as Citigroup cuts rating two full notches from ‘buy’ to ‘sell’

“Dell Inc. shares fell almost 4% Friday after Citigroup analyst Richard Gardner cut his rating on the No. 1 personal-computer company to sell on concerns about the company’s growth rates and eroding margins. Gardner didn’t just lower Dell to sell, he cut his rating by two full notches from his previous opinion of buy, cut his price target on the stock to $28 a share from $37, and lowered his fiscal year earnings-per-share forecasts on Dell for 2007, 2008 and 2009,” Rex Crum reports for MarketWatch. “Investors showed their displeasure with Dell, sending the company’s shares down to a 52-week low of $27.07 at one point in early trading.”

Crum reports, “Gardner said that the company is being negatively impacted by several factors, including declining demand in its main, corporate end markets, and cost-cutting by competitors. Gardner also pointed to data from technology research firm IDC, which on Thursday released information about the size of the U.S. PC market. The IDC figures cited flat PC shipment growth for Dell in the U.S. during the first quarter of this year, and only 5% year-over-year growth for the entire U.S. PC market. As a result, Gardner said Dell is sure to feel the pinch of one of its most-important business areas. ‘In the face of likely further slowing in end market growth domestically, near-term prospect for Dell’s most-profitable end market do not seem bright,’ Gardner wrote in a research note.”

Full article here.

MacDailyNews Note: Current market values: Dell: $63.9 billion, Apple: $57.4 billion. The next time Apple passes Dell in market value will be the last.

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25 Comments

  1. OK. Once again, everyone point at your computer (or in Dell’s general direction) and give them a big, “HAHA”, in your best Nelson voice (as in Nelson the bully from the Simpson’s).

  2. When all you have to offer is a cheap price on a commodity item you are a One Trick Pony. Apple has ratcheted is production costs down to a level comparable to Dell while maintaining their higher margins. The difference is OS X.

    While Apple has diversified it’s profit base to include the iPod, iTMS, an ever expanding line of application software and Retail, Dell is still stuck in it’s loss-leader Ghetto of pimping glorified white box PCs. Their recent purchase of Ailenware shows their desperation to improve their margins.. With Lenovo and others cranking up they are just another PC supplier and they will not be able to beat a Chinese company on price for very long.

  3. Andrew,

    It’s great to see resellers taking advantage of Boot Camp capability to sell more Macs. When you think about it, Microsoft Windows XP is just another application that Mac users can choose to use (or not). When you look at it like that, it really doesn’t sound very threatening, does it?

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