Monday, September 11, 2006

More Bad News For Dell

They are canceling their analyst meeting, stopping their share repurchase plan, and delaying their quarterly results. This scandal is really taking up a lot of their time and it looks like it has pissed off the Wall Street guys as well:

Tech sector analysts were left furious by the last-minute cancellation of Dell's financial presentations, due to be held tomorrow in New York. Many had already traveled to the city from the west coast. It is the second time that Dell has delayed the presentations, which were originally scheduled to be held in April.

If you have a strong stomach DELL might be a great contrarian play in the near term. I wouldn't touch it with a 10 foot pole though because I'm seeing an era where the physical computer will become as ubiquitous as the the desk it sits on.

Companies like Dell will just have to exist on a paper thin margin and try to make money selling the PCs in bulk or to emerging markets or something. Dell's glory years of fast growth and heady profits are behind it unless they reinvent themselves by making some other thing. Selling tons of personal computers through the mail is not going to cut it no matter how efficient the process is.

I think companies like Lenovo (who can rely on cheap Chinese labor) and HP (which can sell their PCs without a shipping markup) will become the new leaders in this industry. I would put decent money on Dell starting to lose money every quarter in the next few years unless they do something drastic. Could this be what Dells are good for in a few years?

No comments: