One On One With Terry Daniels, Technology analyst at Edward Jones
Thursday, February 16, 2006
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SUSIE GHARIB: Dell, the world`s largest personal computer maker, delivered record quarterly earnings and revenues after the bell today. But its stock seesawed in after hours trading. Dell earned $0.43 a share in its fiscal fourth quarter, $0.02 better than estimates. Revenues jumped 13 percent to $15.1 billion, also higher than Wall Street expectations. The company credits the strong performance to selling more computers to businesses and increased sales outside the United States. Looking ahead, Dell expects revenues in its fiscal first quarter to be as high as $14.6 billion and earnings of $0.39 to $0.41. It also said it will buy back at least $1.2 billion in stock. Joining us now to talk more about Dell and its outlook,
Terry Daniels, technology analyst at Edward Jones. Hi Terry.
TERRY DANIELS, TECHNOLOGY ANALYST, EDWARD JONES: Hello, thank you for having me.
GHARIB: Let me first start talking to you about Dell stock in after hours trading. Initially right after the earnings report came out, the stock moved up quite sharply and then as the evening went on, the stock went into negative territory. Why the U-turn? What`s the disappointment?
DANIELS: Well, I think the initial reaction was due to the better than expected results on revenues as well as earnings, which you alluded to. However, I think heading into the first quarter, the folks are a little concerned that sales guidance and margin guidance wasn`t better than expected.
GHARIB: Now, you have a buy on the stock. Do you still feel that way?
DANIELS: Yes, I do. I mean I still think that this is a company that is an excellent operating model. They`re a low-cost provider. They`re growing faster than the overall market in key segments, in new markets, including printers and storage, in new geographies like China, but I think it is one of those things where the market expects so much out of Dell whose historically exceeded expectations in the past, that whenever things aren`t going as gang-busters as they have, you see a little bit of softness in the shares and I think that`s what we`re experiencing.
GHARIB: Now Dell has been having some tough competition from Hewlett- Packard and Hewlett came out with strong earnings yesterday. Its stock was up 7 percent during regular training. Are there any concerns about these competitive issues for Dell?
DANIELS: I think what we have is a revitalized Hewlett-Packard. Certainly under new CEO Mark Herd, the company is executing much better than what they`ve had in the past. They sort of stepped over themselves in the past, but I think that they`re getting their act together. So that is putting some additional competitive pressure on Dell. Nonetheless, as I said, Dell is delivering some pretty strong numbers in terms of double- digit growth in key product segments.
GHARIB: In terms of its growth, we know that Dell has been in a slump. Is it really growing? Is it back to the old Dell?
DANIELS: Well, I think back to the old Dell is kind of tough. First of all, we`re not in the bubble period that we were in before and second of all, we do have some revitalized competitors in the form of Hewlett- Packard, also in the form of Lenovo, which has IBM`s old PC business. So the competition is still a bit tough, but I think it is a little bit premature to basically say the Dell days are over.
GHARIB: Terry, just want to check with you, do you own either Hewlett- Packard or Dell?
DANIELS: No, I don`t.
GHARIB: And does your firm have any business relationship with either of these stocks?
DANIELS: We do not.
GHARIB: All right. Thank you so much for coming on the program and sharing your views. We appreciate it.
DANIELS: Thank you.
GHARIB: We`ve been speaking with Terry Daniels, technology analyst at Edward Jones.
