Prudential notes that preliminary CQ406 data from IDC suggests a slowing PC market and continued share loss for Dell (NASDAQ:DELL). Similar to last quarter, they expect a negative reaction for Dell shares on this news.
In anticipation of this data, they completed a round of checks with contacts across the PC supply chain. Checks indicate that through the month of December Dell continued to execute to a strategy of trading unit growth for profitability across all of its business segments.
While the unit growth is lower than they anticipated according to IDC, firm's checks suggest that Dell is on track for solid margin expansion in the quarter, offsetting any adverse affect from the lower unit sales. They do not expect this share loss to continue as they are starting to see the company become more aggressive in driving PC growth in the corporate space. Additionally, they see strength in servers, storage, and services, as well as component costs initiatives contributing positively to the bottom line.
Firm is maintaining their Street high FY'08 EPS estimate of $1.61 as they believe the company will post upside to consensus estimates in coming quarters. They recommend that investors use any weakness to buy shares of Dell. Remains Overweight with a $31 price target.
Notablecalls: Expect to see weakness in DELL followed by a trading bounce after the open. Nothing major, though.
In anticipation of this data, they completed a round of checks with contacts across the PC supply chain. Checks indicate that through the month of December Dell continued to execute to a strategy of trading unit growth for profitability across all of its business segments.
While the unit growth is lower than they anticipated according to IDC, firm's checks suggest that Dell is on track for solid margin expansion in the quarter, offsetting any adverse affect from the lower unit sales. They do not expect this share loss to continue as they are starting to see the company become more aggressive in driving PC growth in the corporate space. Additionally, they see strength in servers, storage, and services, as well as component costs initiatives contributing positively to the bottom line.
Firm is maintaining their Street high FY'08 EPS estimate of $1.61 as they believe the company will post upside to consensus estimates in coming quarters. They recommend that investors use any weakness to buy shares of Dell. Remains Overweight with a $31 price target.
Notablecalls: Expect to see weakness in DELL followed by a trading bounce after the open. Nothing major, though.
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