PC giant Dell (DELL) got a nice spike up in its share price when a memo from CEO Michael Dell was leaked to the press. In it, Mr. Dell made a point of saying that it would not be "business as usual" at the company. It would find new ways to serve customers. Etc, etc, etc.
The stock did not stay up for long. It now trades flat for the last year. The S&P is up about 15%.
Mr. Dell really can’t solve his problems. He tends to cater to companies and they are becoming tight-fisted. Hewlett-Packard (HPQ) has gained PC share both worldwide and in the US. Many of its customers are individual consumers. They seem to be happier to part with their money than enterprises are. Dell also faces Asian competitors that have become much larger over the last two or three years. The leaders are Acer and Lenovo, and they want to increase their share in the Far East while picking some up in the US.
Dell also faces more competition for its server business. Sun Micro (SUNW) is making a mediocre effort to revive its server sales, but it is competition nonetheless. And IBM (IBM), HP, and several Asian companies lead by Hitachi (HIT), are fighting for server share as well. They are bigger than Dell and seem willing to invest in increasing their presence in a market which is still growing quickly. Virtualization software is likely to slow that growth in the next year, which will hurt Dell and the balance of the server leaders.
Dell’s shares are dead meat. The company just does not want to admit it.
Douglas A. McIntyre can be reached a [email protected]. He does not own securities in companies that he writes about.
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