We’re # 2!

I’ve been a big critic of Dell over the past 2 years, but this news surprised even me: Dell slipped to number 2 today in PC sales, behind resurgent Hewlett Packard. The WSJ reported:

"Dell grabbed the lead in unit sales from H-P in 2003, but H-P has rebounded — taking 16.3% of world-wide shipments in the third period, edging out Dell’s 16.1% share, Gartner Inc. said.

IDC, which includes some types of systems that Gartner doesn’t, put both companies at 17.2% of the market, though it said H-P’s shipments were slightly higher than Dell’s.

Dell remains well ahead of H-P in U.S. sales, the two firms said. But they added that H-P has had stronger momentum lately, in part because it is more focused on the fast-expanding consumer market than Dell, which has focused more on corporate sales."

If the Dell mess gets any worse, I may have to take a seriously contrary look at where the downtrend would get broken, and consider the stock as a long value candidate.

A fast eyballing of the chart suggests any move above 26 on volume would present an intriguing technical picture. But I suspect its still a little early to get too excited about Dell’s "turnaround."   

Amazing. How the mighty have fallen.


Dell 10 Year


H-P Retook Lead For PC Shipments In Third Quarter
October 19, 2006; Page B3

Options Trouble Punishing Tech
The Big Picture, Saturday, July 22, 2006

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What's been said:

Discussions found on the web:
  1. AIR commented on Oct 19

    I was surprised to see how well IBM / Lenovo was doing in quality rankings based on yesterday’s at least somewhat anecdotal report on CNBC. IBM’s management should focus on spreading the word if the report holds up under scrutiny…

  2. Boomer commented on Oct 19

    I’ve been in charge of purchasing Dell computers for my company for 6 years now and I can confirm that that Dell sales force is one of the worst. Same can be said about the quality of their products. Having said that it doen’t surprise me that they’re loosing market share and their stock keeps hitting new 52-week lows

  3. Steve Colglazier commented on Oct 19

    Be careful Barry. We view this as a huge value trap stock. They have destroyed their balance sheet (large reduction in book value, big increase in A/R, etc) in an attempt to keep the ship afloat. To be clear, they are not going bankrupt and have a well known name brand, but the news is liable to be much worse in the future, particularly if we slow down even more.

  4. V L commented on Oct 19

    DELL is the extremely poorly managed company. Product quality is below average. DELL customer service is the worst in the industry. They have a long way to go. The stock is not really cheap (P/E of 20). It needs to drop to low teens to get my attention.

  5. Michael commented on Oct 19

    I don’t know anything about economics, but I do know that Dell currently has one of the worst reputations in the business for reliability and service. I don’t know how, or why, they should rebound unless they do something about that.

  6. Barry Ritholtz commented on Oct 19

    Don’t get me wrong — I am not a buyer here. But the company is rapidly becoming hated — and I find that fascinating . . .

  7. BDG123 commented on Oct 19

    IBM doesn’t have anything to do with PCs anymore. The IBM PC business is owned by the communists and run by a former Dell exec. Talk about strange bedfellows. The Chinese company handed over management to Americans when THEY bought an American company.

    IMO the short term buy point on Dell was off of the impulse low of 18ish. It is rising in sympathy with megacaps as relatively defensive and as an early next cycle play. I believe the long term buy point is likely yet to come per VL’s comments on valuation.

    Comments on service, balance sheet, quality, etc. Well, haven’t we heard that all before? It was HP two years ago. With $10 billion in cash, no debt and a still very profitable company, the problems will be addressed by this management or the next. Don’t fall into rearview mirror analysis. Stocks rise anticipating tomorrow’s news and most companies don’t continue to make stupid decisions indefinitely.

  8. Josh commented on Oct 19

    The turn-a-round in the stock price will happen when the ceo gets canned. Too many cooks in that kitchen. As a contrarian call, just look at what Boomer, Steve, VL, & Michael say. They all hate it, so the bottom can’t be too far away.

  9. KP commented on Oct 19

    I bought a dell in 2001 that is still running like a top and I can honestly say that it is a well put together machine. I have watched with amazement how each new generation of machine out of dell, at least on the mid-range consumer/small business side, has continued to underperform the previous one. This in addition to piss poor customer service, is putting Dell in a hell of spot, and people tend to have longer memories about the bad experiences than good. Good Luck Dell. My next PC will be DIY, as HP is in reality not much better.

  10. Royce commented on Oct 19

    HP is now the favorite on Wall Street and this will boost them even further. It seems odd to me that Wall Street would get so thrilled over the mass PC business and it’s crappy margins that basically mandate a continual tradeoff between price on the one hand and quality and customer service on the other, but that’s the nature of the market.

  11. S commented on Oct 19

    DELL has destroyed its balance sheet? Too funny.

  12. Bob A commented on Oct 19

    They have a brand that for a huge percentage of the market is synonomous with computer. They need some fresh blood and when that happens their chart is very likely to look like HPQ within a year or two.

  13. thx1138 commented on Oct 19

    Dell’s quality is as good (or as bad) as anyone elses. The reason Apple and Lenovo get good ratings is because you pay for it. Their support services are significantly more expensive. Likewise Dell’s is very good but only if you are a big corporation. We get crazy good service from them. Dell consumers don’t pay a lot and get crap as a result.

  14. me commented on Oct 19

    “Dell consumers don’t pay a lot and get crap as a result.”

    Wrong, I helped my sister-in-law buy her first machine. Her husband always has lots of questions, so I signed them up for the super duper service that they could ask any quiestion about software or anything,

    The first call they were on hold 45 minutes to Indians, who then after finally coming on the line, switched them to marketing to sell them the same service they had already paid for.

    Since then, I have recommended 3 computers to family, none of them Dell, and I odn’t care how many times Rollins says they have turned it around, they have several years ahead of them to prove it to me before I sell any more for them. My brother is going to need a couple new PCs for his business and they won’t be Dell.

  15. vfsv commented on Oct 19

    You’re missing the “big picture” here:

    We already knew 2Q06 y-o-y PC unit growth was more than offset by declining prices. (i.e., total PC dollar sales fell)

    Today’s news is 3Q06 y-o-y PC unit sales actually fell!

    Given continued double-digit unit growth in China, this implies a significant slowdown almost everywhere else.

    The short answer to why Dell is losing market share is they decided not to compete in the extremely price-sensitive China market. They gave up volume, but probably not to much profit. Just like with semi fabs /foundries, the “trick” will be if HPQ can use the extra sales volume to drive down costs and raise profits on all their PC sales.

    Dell, who is recognized as having the lowest cost structure, and highest leverage to declining part costs, already tried this strategy and gave up. We wouldn’t bet on a profit bonanza from HPQ’s PC unit sales growth.

    To keep with “What’s really happening,” visit:


  16. bob commented on Oct 19

    Dell problems were:

    1. Too late to start using AMD, which was far superior to Intel from 2002 to mid-2006

    2. No in-house R&D. Dell pretty much just slap the “Dell” sticker to various boxes made by Taiwan and China makers. Sometimes they are not even quite sure what exactly is inside the box :-)

  17. BDG123 commented on Oct 20

    ur fib lines are drawn upside down. ie, in retracement mode. the 61% retracement should be below the 38% on a correcting price chart. is that a bug in stockcharts or did you draw from peak in 2000 to 1996? either way, they need to fix their charting. the software should be smart enough to know you are drawing from a prior low

  18. tech98 commented on Oct 21

    Dell had a big problem with Optiplex GX270s in the last couple of years. They changed the electrolyte used in a capacitor, which caused the motherboard to fail after a few months, crippling the machine. Worse, they gave users a hard time over replacing the motherboard, refusing to replace boards on all GX270s even as it became obvious that every unit was going to fail, forcing users to wait for them to fail and then be down for a few days until field support could replace them. They have a real black eye in the corporate/higher ed market now.
    I bought Dells in the late 90s and they were the gold standard; their tech support was quite good also. I can’t fathom the level of management’s shortsighted greed and stupidity that let their quality and reputation run into a ditch so fast. I suspect they became swollen-headed over the strength of the Dell brand name, and thought they could coast along pumping out cheap crap to make a quick buck, and everyone would still buy it.

  19. traderb commented on Oct 21

    very interesting post.

    reading this and having a look at Dells website, it seems that at the current share price their is risk of further downside. No wonder sales to consumers are falling, they have only 7 laptops in the “Home” section, and only ONE of these is 12″ screen, and ONE is 14″ screen, the others are all larger. Now I dont know about most of you, but I would think there is more demand for smaller laptops out there than that (I use a 10.6″ laptop, that size is not even available at Dell!). If I was in charge of the products they offer, i would be EMBARRASSED at the selection they have.

    So I agree with an earlier poster that it may take new management to get the stock higher, cos whoever is running it just now seems to have no idea of offering customers a decent product selection.

    And actually, just looking at HP’s site, its even worse! These companies suck, short both of them.

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