Chicago (IL) - Yesterday, a JPMorgan analyst downgraded Round Rock, Texas's Dell Inc. to "Underweight" from "Neutral," citing the company's lack of diversification in a declining market. The analyst also adjusted his previous rate of global PC sales decline from -3.7% to -13.5% - due primarily to expected corporate computer replacement orders being held until 2010.
JPMorgan's analyst, Mark Moskowitz, gave the reason: Unlike other companies like Apple with its iPhone and iTunes businesses, or Hewlett-Packard and its printer business, or even IBM and its related software and service business, Dell has not moved into other areas of sales outside of various types of computers and related hardware. This lack of diversification pigeonholes Dell in a declining market. However, this reality may not be the case for much longer.
Several analysts, including Shaw Wu of Kaufman Bros, believe Dell is planning its own smartphone. Wu said, "The exact timing of Dell's launch is not clear but our sources indicate it is closer to reality than before. We believe it is likely inevitable that Dell enter the cellphone space given the cannibalization of PCs by smartphones and highly functional mobile devices."
Dell has reportedly been working on the phone for two years and now, a year after hiring Ron Garriques who developed RAZR, the time may be approaching - possibly at 3GSM, or the Mobile World Congress event in Barcelona later this month.
Dell's shares closed down 3.7% on the downgrade despite having not yet reported its Q4'2008 earnings (expected later this month). Dell's Q3'2008 earnings were reported down 17% in this declining market, with their stock price falling 8% on the news.
It's unlikely Dell has found rebound footing since then. As such the new valuation by JPMorgan may be exactly in line with expectations of Dell's most recent quarterly declines - should Dell's trend continue in the current economy.
JPMorgan's analyst, Mark Moskowitz, gave the reason: Unlike other companies like Apple with its iPhone and iTunes businesses, or Hewlett-Packard and its printer business, or even IBM and its related software and service business, Dell has not moved into other areas of sales outside of various types of computers and related hardware. This lack of diversification pigeonholes Dell in a declining market. However, this reality may not be the case for much longer.
Several analysts, including Shaw Wu of Kaufman Bros, believe Dell is planning its own smartphone. Wu said, "The exact timing of Dell's launch is not clear but our sources indicate it is closer to reality than before. We believe it is likely inevitable that Dell enter the cellphone space given the cannibalization of PCs by smartphones and highly functional mobile devices."
Dell has reportedly been working on the phone for two years and now, a year after hiring Ron Garriques who developed RAZR, the time may be approaching - possibly at 3GSM, or the Mobile World Congress event in Barcelona later this month.
Dell's shares closed down 3.7% on the downgrade despite having not yet reported its Q4'2008 earnings (expected later this month). Dell's Q3'2008 earnings were reported down 17% in this declining market, with their stock price falling 8% on the news.
It's unlikely Dell has found rebound footing since then. As such the new valuation by JPMorgan may be exactly in line with expectations of Dell's most recent quarterly declines - should Dell's trend continue in the current economy.