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Downgrade clips Dell shares

Dell Computer Corp. (Nasdaq: DELL) shares fell 2 5/16, or 6 percent, to 35 5/16 Tuesday after Warburg Dillon Read cut the stock from a "buy" recommendation to a "hold" and lowered its fiscal 2002 earnings estimate by 10 cents a share.

"As it captures an increasing share of the personal computer market, we believe Dell's growth rate must continue to slow," said analyst Charlie Wolf in a research note. "Against a headwind of slowing growth, Dell's shares are unlikely to outperform."

Warburg Dillon Read cut its fiscal 2002 earnings estimate from $1.30 a share to $1.20 a share, pushing Dell shares to their lowest price since June.

On Thursday, Dell will report its fourth-quarter earnings with First Call consensus expecting a profit of 15 cents a share.

Earlier in the quarter, Dell warning that its fourth-quarter earnings would fall short of analysts' estimates.

First Call consensus originally expected the PC maker to earn 21 cents a share.

Citing an "inconsistent" flow of key semiconductor components, Dell said it will likely post a profit of $430 million on sales of $6.7 billion.

It also said a slower-than-expected rebound in sales to corporate and institutional customers related to the Y2K rollover was responsible for the shortfall.

Dell shares peaked at 53 15/16 in December after falling to a low of 31 3/8 in May.

Following the downgrade, 30 of the 36 analysts following the stock still rate it either a "buy" or "strong buy."