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ANALYST WATCH: Dell, Sportsline.com back in favor

    Dell's fourth-quarter earnings were a disappointment by any measure but analysts haven't given up hope on the PC maker, mainly because of its strong server sales and the rollout of Windows 2000.

    On Thursday, Dell (Nasdaq: DELL) posted a profit of $436 million, or 16 cents a share, on sales of $6.8 billion.

    First Call consensus lowered its profit estimate from 21 cents a share to 15 cents a share last month after Dell warning that its fourth-quarter earnings would fall short of expectations.

    Strong server sales and the company's ability to do half of its total sales online have convinced analysts that Dell is worth a shot at below $38 a share.

    CS First Boston analyst Michael Kwatinetz reiterated his "strong buy" rating.

    "Better momentum, Windows 2000, and strong enterprise penetration could drive upside," Kwatinetz said in a research report. "Gross margin of 19.2 percent should improve as component constraints appear to have eased."

    PaineWebber's Don Young raised his fiscal 2001 earnings estimate from 91 cents a share to 93 cents a share but cut his 12-month price target from $60 a share to $50 a share.

    Finally, Piper Jaffray analyst Ashok Kumar reiterated his "strong buy" recommendation and $55 price target, arguing that post-Y2K and pre-W2K sluggishness kept the stock stuck in neutral.

    "We expect the corporate upgrade cycle to resume by the second quarter," Kumar said in a research note. "Ability to post upside to tempered expectations should improve the relative strength of the stock."

    The $6.8 billion in sales marks a 31 percent improvement from the year-ago quarter when it earned $425 million, or 15 cents a share, on sales of $5.2 billion.

    For the fiscal year, the PC maker earned $1.9 billion, or 68 cents a share, on sales of $25.3 billion, up from a profit of $1.5 billion, or 53 cents a share, on sales of $18.2 billion in fiscal 1998.

    Dell's worldwide services sales jumped to more than $490 million, up 50 percent from the year-ago quarter.

    Sales of software and other peripherals improved by 32 percent to $610 million in the quarter. Non-system sales accounted for 16 percent of its total sales.

    Total PC shipments jumped 36 percent from the year-ago quarter and 50 percent for the fiscal year.

    Thirty-one of the 36 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

    Scoring big with Sportsline.com

    Sportsline.com Inc. (Nasdaq: SPLN) hasn't exactly captured investors' attention of late, falling from a 52-week high of 83 1/4 in December to around $40 a share this week. In between it beat Street estimates in its fourth quarter, losing $13.9 million, or 57 cents a share, on sales of $21 million.

    But Raymond James' Phil Leigh still contends the online sports content provider is due for a breakout.

    "We believe the market is not recognizing the hidden value of Sportsline's investments in affiliates and subsidiaries," Leigh said in a research note. "When adjusting for the hidden assets, we believe that a stock price as high as $84 per share can be justified, although we're sticking with our target of $61 on the basis of conservatism."

    Sportsline.com still has a contract with America Online Inc. (NYSE: AOL) through October 2001. Company officials said that relationship with AOL accounts for about 15 percent of its total traffic.

    Leigh said Sportsline.com would still get about 10 percent of its traffic from AOL regardless of the anchor tenant relationship because of AOL's dominance as an Internet service provider.

    On the analyst front, Sportsline.com has been relatively quiet. The last significant move was made by Thomas Weisel in December when it started it with a "buy" recommendation.

    Eight of the 10 analysts tracking Sportsline.com shares rate it either a "buy" or "strong buy."