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Wednesday, July 12, 2006

Most Widely Traded 48 Hour Clock: Dell's Hell

24/7 Wall St. has begun coverage of the 36 most widely traded stocks, eighteen each from the NYSE and the NASDAQ. Most of these stocks trade over 50 million shares a week. This new feature will highlight each of the 36 stocks at least every 48 hours giving investors fresh infomation and perspective on the companies whose shares are most likely to move the broader markets.

Stock Tickers: DELL, AMD, INTC, MSFT, HPQ, AAPL

Dell Inc (DELL) has been trading like they are about to change their ticker to "HELL" or even worse. Tech traders have endured warnings and downgrades of estimates or targets almost on a weekly basis.

Just this morning UBS trimmed their earnings targets for Fiscal Year 2007 ($1.41 down to $1.36 EPS) and they trimmed their $26.00 target down to $24.00. This is becoming a common trend for DELL to trade lower and lower. There is a weak PC market, storage sales are weak, software is weak, processor sales are weak, and memory sales are weak.

In short, there is no one looking for any immediate good news in the PC group or any group related to it. DELL is down over $1.00 at $22.36, and that is down from its $29.95 close on December 30, 2005 and down from its highest close this year of $32.00 on February 14.

Dell used to have the only model for PC and tech sellers, but now with so many competitors emulating the model it becomes more difficult to outshine evry day. Hewlett Packard (HPQ) has made in-roads and gone through a turnaround, Apple (AAPL) is selling more Macs, and Lenovo (IBM's old PC unit sold to China) has been a thorn. Not everyone is buying the higher-end models where the margins are, and Dell is not exactly a beneficiary of the switch to mobile computing in the form and fashion that has been forming. Laptops are still strong, but all other areas are seemingly soft.

As a matter of record, many expect this environment to get Worse before it gets better. If Microsoft (MSFT) falls out of the "80% chance we make the January 2007 launch date" as Bill Gates said earlier in the week, then this stock in particular is going to have even more pressure. It has the dual supplier format now on a limited basis from Intel (INTC) and AMD (AMD), but that isn't accross all product lines and isn't anywhere near enough to help the beleagured sector. There are still more risks than reward perceptions from the street, and until we see the spectrum of earnings that isn't going to change on a dime.

So far about all anyone bullish in the name can cheer is two issues. The bulls can bet on the idea that perceptions are now so bad that any news not showing a bloody forecast may be rewarded in a relief rally, and they can try to discuss "compelling valuations" and "overly negative sentiments". Maybe that is three things, but you can get the drift. This really makes you wonder if the shares will break under $20.00 before the tides in this sector change.

Jon C. Ogg
July 12, 2006
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