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ANALYST WATCH: Dell&#039s got support, direction

Quietly, Dell Computer's moved back into striking distance of its 12-month high after floundering a bit in the wake of its disappointing fourth quarter. With each passing week, analysts are jumping back on the bandwagon.

This week, Piper Jaffray reiterated its "strong buy" recommendation and set a 12-month price target of $65 a share.

"With expectations recalibrated to more realistic levels, if revenue growth rates converge to the 30s, the stock could be perceived as cheap relative to other category leader technology stocks," said analyst Ashok Kumar in a prepared release. "From a strategic perspective, the company needs to wean away from corporate desktops and capitalize on explosive infrastructure opportunities in the Internet/e-commerce service provider space."

Salomon Smith Barney analyst Richard Gardner also chipped in with some positive comments.

"We believe that that Dell's unit shipments are at least tracking to expectations this quarter and that gross margins are ahead of expectations," Gardner said in a research note. "Based on trends so far, we believe that Dell will exceed our earnings-per-share estimate and the consensus by $0.01-$0.02 this quarter."

Gardner also reiterated his "buy" rating and bumped up his 12-month price target from $55 a share to $71 a share.

First Call consensus expects Dell (Nasdaq: DELL) to earn 16 cents a share in its first quarter and 90 cents a share in fiscal 2001.

Most analysts are expecting an upside surprise this quarter, stemming from higher profit margins and sales of its enterprise servers.

It's also going to announce its entry into the appliance server market later this year in the hopes of tapping into a market that's expected to exceed $10 billion by 2003.

Last quarter, Dell matched reduced analyst estimates
, earning $436 million, or 16 cents a share, on sales of $6.8 billion.

Following the profit warning and less-than-stunning results, Dell shares slumped to below $36 a share in February.

Since that slide, the stock's moved up to a 52-week high of 59 11/16 earlier this month.

Dell recently announced the Internet Partners Division, a group focused on providing solutions for ISPs, ASPs, and Web hosting firms. More than half of its total sales are done through its Web site.

This evolution to more non-box businesses gives analysts the confidence to recommend Dell despite the brutal pricing pressure in the PC sector.

Earlier this quarter, CS First Boston analyst Michael Kwatinetz reiterated his "strong buy" rating, saying "better momentum, Windows 2000, and strong enterprise penetration could drive upside."

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.

Thirty of the 34 analysts following the stock maintain either a "buy" or "strong buy" recommendation.