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Dell slips on downgrade

Dell Computer (Nasdaq: DELL) fell almost 4 percent Friday after the stock was downgraded to a "long-term attractive" from a "buy" by BancBoston Robertson Stephens.

Shares were down 1 3/8 to 40 7/16 Friday morning after Bancboston Robertson Stephens analyst Daniel Niles said he cut Dell to "long term attractive" from "buy." Niles cited supply issues and pressured margins for the downgrade.

"In our view, the recent supply issues caused by the Taiwan earthquake and Camino delay will result in revenue growth being less than expected. In addition, we believe that margins are under tremendous pressure given the price premiums being paid for components," Niles said.

"On the demand side, we believe that slightly slower corporate desktop demand is being balanced by higher consumer demand," he added.

Niles also lowered 1999 earnings-per-share estimate from $0.77 to $0.74, while maintaining a calendar 2000 revenue estimate and earnings-per-share estimate of $1.04.

Dell has been having a rough week with analysts. A recent report by Rob Enderle of Giga Information Group criticized Dell's business practices.

In a recent report, Enderle said Dell was plagued by growing pains and losing new accounts because of service and support problems as well as product delivery delays.

Dell was livid with the influential computer analyst for issuing a critical report that faults the fast-growing computer maker for allegedly attempting to cover up a series of miscues.

Accusing Dell of "an arrogant disregard for the customer," Enderle said the problem was exacerbated by "what appears to be a growing tendency at Dell to cover up problems and not correct them." He also said other high-tech companies with fast growth such as Microsoft Corp. (Nasdaq: MSFT) have similarly been sidetracked.

And a recent report by Ashok Kumar at US Bancorp Piper Jaffray wondered whether Dell shares were stuck in their current trading range. Kumar has a "buy" rating on the stock, and a price target of 55. Kumar commented on Dell's recent $6 billion, 7 year deal with IBM Global Services whereby they would support Dell's U.S. customers in the business, government and education segments.

Kumar also said the stock peaked in December of last year and the rally over the past three months has been under its long-term trend line. "If the stock does not work itself through the overhead supply at $46, it could head back to the low end of its $32-$54 trading range," he added.

Reuters contributed to this report.