DELL To Sell PC Plants

In a report from Reuters citing a Wall Street Journal article this morning, Dell, Inc. (DELL), once a leading U.S. computer maker, has decided to sell off “most, possibly all” of its computer factories within the next 18 months.  Cutting costs and improving profitability were named as the two major goals, as desktop computers Dell has specialized in have now been overtaken by laptops.

Dell has stumbled in a rough patch recently, missing 2nd-quarter (ended July) earnings estimates, and seeing a flurry of analyst estimate revisions head downward.  In just the past week, 11 analysts have lowered earnings expectations for the October quarter, and 14 have done so for fiscal year 2009 (ending January).

Zacks senior tech analyst Steve Biggs, CFA has also noted his disappointment in recent Dell results, telling me in an interview just completed (due to be published Monday, the 8th): “Trouble occurred for Dell as [the company] took aggressive price cuts in an effort to take market share, but weren’t able to keep costs in line with its new pricing. However, IBM (IBM) and HP (HPQ) are both in the same business and reported very good results for the quarter. Although Dell was able to drive unit volume with its actions, it appears that it will take time for profitability to improve.”

Dell hopes to jump-start this profitability with the sale of its factories, apparently.  The current Zacks Rank is #3 (Hold) on DELL shares.

Posted in Categories: Contributor, External Research, Stocks, Technology, USA.

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