Tough Times for Apple and Dell?

The market is down again today. The S&P 500 has fallen below 1,250, and oil is up to $76.30 a barrel—a new all-time high. There’s a lot of anxiety in the tech sector today as Dell (DELL) will announce its new pricing strategy at noon today.
Business Week notes that there’s growing concern the computer industry is in for a bigger slump that previously thought:

Some (analysts) are concerned price wars are imminent and that economic slowdown could crimp overall demand. “There’s a softness in the market that’s building,” says Richard Shim, a senior research analyst at Interactive Date Corp. In the past two weeks, IDC cut its 2006 forecast for U.S. PC growth to 5.7%, from 6.8%. “In ’04 and ’05 there was tremendous growth. In a market that’s as mature as this industry is, there’s no way you can maintain those levels.”
Dell fed worries on July 12 by announcing that the following day it would unveil a “major pricing initiative”e; for U.S. consumers and small businesses. The same day, UBS Investment Research said it was cutting earnings estimates for Dell on the belief the company “continues to be impacted by competition and adverse mix shifts within the PC market.” Dell’s performance in recent quarters (it lost U.S. share to rivals in the first three months of the year) has given investors little reason for confidence—though the company has embarked on a turnaround campaign that includes beefing up customer service.
Credit Suisse issued a report the same day that did a number on Apple’s stock. The computer maker, which reports fiscal third-quarter results July 19, will probably issue sales and earnings forecasts for the current period that falls short of analysts’ expectations, Credit Suisse analyst Robert Semple wrote.
Apple is likely to tell analysts that fourth-quarter sales will be $4.6 billion to $4.8 billion, compared with analysts’ estimates for sales of $5 billion, the report says. “We expect Apple will once again use the September quarter to reduce iPod inventories as the company prepares for a refresh of its product lineup.”

Posted by on July 13th, 2006 at 10:16 am


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