Dell Inc. now at $8 a Share

It didn't take Dell Inc. (NASDAQ:DELL) long to go from over $20 a share to current levels of $8 and change, and it could get even worse.

Before we get into it, just take a look at Dell's Chart:
 

We turn to Eric Savitz:

Last night’s weak results from Hewlett-Packard (HPQ) does not bode well for Dell (DELL), which next Thursday is due to report earnings for its fiscal fourth quarter ended January.

Among other things, HP reported a 19% drop in its personal systems group in the January quarter, a 19% drop in imaging and printing and an 18% decline in enterprise storage and servers. The current consensus forecast for Dell is for revenues of $14.48 billion, down 9.5%, with profits of 28 cents a share, which makes you wonder if maybe the Street’s numbers are too optimistic.

Indeed, RBC Capital analyst Amit Daryanani this morning responded to the HP report by cutting his numbers on Dell. He notes that the company gets about 60% of its revenues from PCs, a segment which clearly is struggling badly. He notes that HP desktop PC revenue was down 25% in the quarter, on a 15% decline in units, while notebook revenue was down 13% despite 8% unit growth. The implication: ASPs have eroded 10% year-over-year in desktops and 21% in notebooks.

Daryanani says investors will be focused less on sales than on gross margins, looking to understand the company’s pricing strategy. He also says the market will be focused on the company’s progress on cutting operating expenses.

For the January quarter, Daryanani now sees revenue of $13.7 billion and profits of 17 cents a share, down from $13.91 billion and 18 cents, and well below the Street. For FY 2010, he cuts his forecast to $55.4 billion and 97 cents a share, down from $56.5 billion and $1.05, and below the Street at $56.9 billion and $1.19. He says that his previous ASP forecast of a high single-digit drop in desktop prices and a low double-digit decline in notebooks “now appears to have been too conservative.”

DELL today is down 46 cents, or 5.3%, to $8.19.

SOURCE: http://blogs.barrons.com/techtraderdaily/2009/02/19/dell-investors-brace-for-ugly-earnings-report-next-week/