Friday, June 01, 2007

ThinkEquity's Eric Ross on Dell

I wanted to higlight what Eric Ross from ThinkEquity has to say about Dell (NASDAQ:DELL):

The firm notes they applaud its strong quarter. No concrete guidance was provided. Despite its success in beating the financial forecast, the near-term outlook remains challenging: cash flow generation (negative in the quarter) is likely to be permanently lower, margins will likely shrink, ASPs are unlikely to see such a sharp rise again, component prices are not likely to seecontinued declines, and U.S. Federal business is typically lumpy

U.S. Federal sales were the biggest driver of revenues. This appeared to have turned on suddenly after many weak quarters.

Higher ASPs drove better-than-expected revenues—a 14% Y/Y increase—this, frankly, was a real surprise for all the investors and supply chain reps with whom the firm spoke.

The loss of $200 million in cash flow was due to accounts payable, and even if the cash flow bounces back to generation, the company is still generating less cash than it had historically.

Maintains Sell and $20 tgt on DELL.

Notablecalls: Just so you know..

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