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Downgrade dings Dell shares

    Dell shares drifted lower Wednesday, falling 1 9/16 to 40 after USB Piper Jaffray's Ashok Kumar downgrade the stock on concerns about the PC maker's long-term revenue growth.

    Dell (Nasdaq: DELL) shares have yo-yoed between $35 a share and $60 a share throughout the first half of the year.

    On Wednesday, Kumar cut the stock from a "strong buy" recommendation to a "buy," pointing out that Dell has fallen into a "real technical deterioration" in the past year and doesn't possess anywhere near the momentum it did in 1997 and 1998.

    "We continue to believe that Dell does not have adequate earnings power in notebooks, server and nonsystem revenue to offset the secular weakness in consumer and commercial desktops," Kumar wrote in a research note. "Current revenue growth guidance of 30 percent is unsustainable."

    Kumar's downgrade and comments were predictable considering the comments he made about the stock back in May after Dell beat analysts' estimates by 3 cents a share in its first quarter.

    While analysts at a number of brokerage firms were upgrading the stock, Kumar called the Dell outlook "sunny with a possibility of showers."

    In the first quarter, Dell raked in $525 million, or 19 cents a share, on sales of $7.3 billion.

    After getting through a rough stretch earlier this year, Dell officials said the Y2K-related slowdown in PC spending was over and that it expected to post 30 percent revenue growth through the rest of the year.

    "Our revenue goals and expectations for the balance of the year remain unchanged," CFO James M. Schneider said, during a conference call with analysts in May.

    First Call Corp. consensus expects Dell to earn 21 cents a share in its second quarter and 92 cents a share in the fiscal year.

    Twenty-four of the 28 analysts following the stock rate it either a "buy" or "strong buy."

    Its shares moved up to a 52-week high of 59 11/16 in March after falling to a low of 35 in February.