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Wednesday, September 27, 2006

Do The Shorts Think Dell's Death March Is Over?

Stocks: (DELL)(HPQ)(SUNW)

Short interest in Dell dropped 4.2 million shares in September to 43.3 million. Maybe Dell has had enough and could make a little turn North.

Over the last year, the stock has dropped from $34.50 to $22.72. It has had a tiny rally since it was below $20 in July.

Most investors think that the air has gone out of the PC ballon and that Dell's poor execution and bad customer service has hurt the company. It has also lost share in the critical server market. However, it is still the No. 1 PC manufacturer, and the management is acutely aware of its problems. The CEO knows he only has a certain amount of time to improve things, or founder Michael Dell will be pressured to replace him

Dell's stock is also cheap It trades at .9 times sales and has a P/E of about 18. Hewlett-Packard's P/E is 21 and it trades for 1.1 times sales. Even server company Sun Micro, a stock kicked around like a soccor ball for the last several years, trades at 1.4 times sales.

Dell may be down, but it may not be out. If so, some of the short sellers are making a wise decision.

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

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