Your email address:

Powered by FeedBlitz

Or add to your news reader: Add to My Yahoo! Add to Google

Friday, February 27, 2009

Dell (DELL) 4Q:2009 results

Dell reported revenue of 13.4 billion, well below consensus of 14.2 – 14.4 billion.  Some revenue whipsers were as low as 13 billion.  The shortfall was mostly due to a miss in notebooks, which came in down 17% y/y.  PC shipments overall dropped 12% y/y – last quarter they grew 2% y/y.  Average selling prices dropped yet again.

The company managed to put up good EPS numbers due to aggressive expense controls.  They pushed their cost control targets up to 4 billion in savings from 3 billion for next year.  Some analysts are disturbed by this move, as it indicates Dell believes business has much further to fall.  Revenue forecasts for 2010 seem to be dropping to down 20%ish.

While I don’t see a near-term turn in their business any time soon, the stock looks cheap on some metrics, and they do have $9 bil in cash – roughly half their market capitalization.  Even on reduced numbers, with the cost targets they have, estimates for 2010 will remain north of $1 a share.  It’s real tough to sell it here.  The stock probably won’t start to work in any kind of significant way until they’re set to show some sequential revenue improvement which probably won’t be until Q3, but the valuation should definitely attract longer-term investors.  Gross margins are at high levels considering the pressure on the model and its unlikely component costs are going to rise without demand rising -- that’s probably good for them either way.

With Dell trading at 7.5* estimates, its telling you the company will shrink 25% y/y.  At the least, it’s fairly valued on present metrics.  I like the setup here for Q3.  I don’t love the idea of holding onto anything in an economic freefall.  I’ve been saying for several months to sell this stock due to their market share losses.  Their expense controls are extremely impressive and they’re navigating disaster very well so far.

Long a little Dell.

No comments:

Blog Archive