- ThinkEquity's Eric Ross is out on Dell Computer (NASDAQ:DELL) saying speculation has been extremely high over the past several weeks that Dell will bolster its position in China with the acquisition of the PC business unit of China-based Beijing Founder Electronics. Firm's sources close to the deal indicate it will not occur, killed by pressure from the Chinese government.
This would force Dell to look for another strategy in China. Reiterates SELL rating and $17 price target.
Firm's sources believe the negotiations between the two parties have effectively ended as indirect pressure from the Chinese government has put the deal to rest. Management of Founder has publicly denied the rumor of the sale. Additional rumors have circulated that China's state-run Haier Group would buy the PC division. The firm reminds investors that two years ago, the U.S. government approved the sale of IBM's PC division of IBM to China's Lenovo Group.
Founder would have given Dell a solid No. 2 position in China. They believe the combination of Beijing Founder's PC business would significantly improve Dell's desktop PC market share position, as it would also strengthen Dell's sales channel in the China, putting pressure on Hewlett-Packard, and Lenovo.
Mr. Ross notes Dell is looking abroad to grow its PC business. Dell's lackluster growth in the U.S. market is offset by growth in the international arena, in particular, the Asia Pacific region. During the third quarter, revenue growth in the Americas region was weak, as it was down 3% on a year-over- year basis. Dell saw strength in Europe and Asia Pacific/Japan regions which
saw Y/Y growth of 5% and 8%, respectively. Think believes competition and eroding market share underscore the fact that Dell needs to look abroad to grow its PC business.
Notablecalls: Protectionism in the PC area? That can't be good news for DELL. Suspect the stock will get hit today. DELL needs to move outside of U.S. in search of growth and now it looks like there will be major obstacles in one of the largest markets - China. Another excellent piece of research from ThinkEquity's Eric Ross and his team.
This would force Dell to look for another strategy in China. Reiterates SELL rating and $17 price target.
Firm's sources believe the negotiations between the two parties have effectively ended as indirect pressure from the Chinese government has put the deal to rest. Management of Founder has publicly denied the rumor of the sale. Additional rumors have circulated that China's state-run Haier Group would buy the PC division. The firm reminds investors that two years ago, the U.S. government approved the sale of IBM's PC division of IBM to China's Lenovo Group.
Founder would have given Dell a solid No. 2 position in China. They believe the combination of Beijing Founder's PC business would significantly improve Dell's desktop PC market share position, as it would also strengthen Dell's sales channel in the China, putting pressure on Hewlett-Packard, and Lenovo.
Mr. Ross notes Dell is looking abroad to grow its PC business. Dell's lackluster growth in the U.S. market is offset by growth in the international arena, in particular, the Asia Pacific region. During the third quarter, revenue growth in the Americas region was weak, as it was down 3% on a year-over- year basis. Dell saw strength in Europe and Asia Pacific/Japan regions which
saw Y/Y growth of 5% and 8%, respectively. Think believes competition and eroding market share underscore the fact that Dell needs to look abroad to grow its PC business.
Notablecalls: Protectionism in the PC area? That can't be good news for DELL. Suspect the stock will get hit today. DELL needs to move outside of U.S. in search of growth and now it looks like there will be major obstacles in one of the largest markets - China. Another excellent piece of research from ThinkEquity's Eric Ross and his team.
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