Dell's (Nasdaq: DELL) third cut to its sales target this year dealt a big blow to techs Friday; several analysts downgraded the PC maker.
Dell was down 4.81 to 23.563, Compaq (NYSE: CPQ) fell 1.29 to 25.82. Gateway (NYSE: GTW) was unchanged at 46.2 and Apple (Nasdaq: APPL) was down 0.69 to 19.5.
Computer hardware maker Intel Corp. (Nasdaq: INTC) dropped 2.62 to 38.75, Sun Microsystems Inc. (Nasdaq: SUNW)shed 3.25 to 94.37 and computer networking equipment maker Cisco Systems (Nasdaq: CSCO) lost 1 to 52.25.
Several PC analysts downgraded Dell.
Analyst Kurtis R King at Banc of America Securities cut the stock to "market perform" from "strong buy" and lowered his target price to $35 from $37 per share.
Analyst James D. Poyner Jr at CE Unterberg Towbin downgraded the stock to "buy" from a "strong buy" rating; his 12-month target price is $40 per share.
Mark Specker at Wit Soundview maintained a "strong buy" rating on Dell, as well as the low end of guidance for its fourth quarter.
"However, by most reckoning, Dell's fiscal 2002 guidance of 20 percent growth will be taken as a disappointment," he stated in a research note.
Analysts noted that as Dell moves away from its PC desktop stronghold and towards enterprise products like servers, storage and services, the company will find deeply entrenched competition like Compaq (NYSE: CPQ), Sun Microsystems (Nasdaq: SUNW) and EMC (NYSE: AMC).
U.S. Bancorp Piper Jaffray analyst Ashok Kumar Dell as "buy, aggressive." In a research note asking whether Dell can graduate beyond the PC market, Kumar suggested the company needs to migrate away from commodity PC business and focus on improving its mix. The company's negative gross margin trends indicate a tough pricing environment and demand softness.
"With the changing IT landscape, service and BtB strategy need to take precedence over products. Ufortunately, the company is unable to reinvent itself and continues to focus on a business model that it is comfortable with while improving expense ratios," Kumar stated in a research note. He added that there is "no real evidence yet that the stock has bottomed on a sustained basis."