Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Friday, August 18, 2006

Intel and AMD Look To Dell


Dell's sales rose 5% to $14.1 billion. Gone are the days of predictions that the company would reach $100 billion in sales. Jim Cramer is calling for the Dell CEO to be fired. Customer service at Dell has been blamed for alienating customers. The company's laptops catch on fire by some means of spontaneous combustion.

That's all old news.

The biggest issue with the Dell numbers is that PC growth is a thing of the past, at least for now. The Hewlett-Packard numbers were good, but growth in laptops, desktops and workstations was tepid. Dell's growth in Asia was fairly strong at 17%, but those markets are only 12% of Dell's revenues. In the Americas growth was 3% in a geographic area that is two-thirds of the PC giant's sales.

AMD has made a great deal of the fact that they now have Dell as a customer. But, the chip company is whistling past the graveyard.

The demand for AMD and Intel PC ships is falling. Whether investors look at Gateway, Lenovo, Dell or HP, the years of strong double digit growth are behind the industry. In a business with tremendous unit growth companies are not as likely to squeeze supplier hard. Business is good, so why shouldn't everyone get a little. But, Dell's cost of revenue rose 9% on a 5% increase in profits. So, component costs have to be targeted to save money.

Too bad for Intel and AMD. Wall St. does not have to look past Dell's results to see why Intel's stock is down over the last year from$27.49 to $18.56. AMD's has dropped from $42.70 to $23.50. It is up a bit recently on the news that it is taking some share from Intel. But, it is not share of a growing market.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

Powered by Blogger