Dell Plays Wrecking Ball For Entire PC Food Chain (DELL, INTC, MSFT, HPQ, STX, WDC, MU)

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Dell Inc. (NASDAQ: DELL) was nothing short of a really bad earnings report.  The wart on the nose is a declining margin, declining earnings power, and less and less revenue growth.  With only 2% to 4% expected in sequential revenue growth, now the question comes up about accurate Intel Corporation (NASDAQ: INTC) was on its reiterated guidance recently and also about how accurate all of the predictions are in the coming Windows refresh cycle for Microsoft Corporation (NASDAQ: MSFT) and the coming launch of Windows 8.

When you see a drop of 17% on Dell, you might expect that the volume was 100 million shares or so.  As of 11 AM EST we have still not even seen 40 million shares trade against an average volume of 16.5 million.  The volume is strong, but this feels like the sort of news that would drive 100 million shares.  That being said, Dell traded 51,440,000 shares per NASDAQ trading data on its last earnings report day-after.

Hewlett-Packard Co. (NYSE: HPQ) is set to report earnings today after the close of trading and estimates are $0.91 EPS and $29.92 billion in sales.  Let’s just say that it is safe to assume that the estimates have unofficially come down significantly.  H-P shares are down 4.6% at $20.77 and this is a new 52-week low.  As a reminder, HP is expected to announce a major round of tech layoffs today as part of its restructuring.

This appears to be the worst trading day in more than a decade for Dell on a percentage drop.  Dell is down 17.1% at $12.50 now and the prior 52-week range is $13.29 to $18.36.  Dell is now probably under 6-times forward earnings estimates after the drop and H-P is roughly the same.  The problem is that no one is willing to pay for contracting earnings power of this sort.  Dell offers no dividend to entice shareholders to stay around, and HP offers at least a yield of about 2.2% based on today’s price.

Intel Corporation (NASDAQ: INTC) is down 3.2% at $25.19 and Microsoft Corporation (NASDAQ: MSFT) is down 2.9% at $28.90.

Elsewhere in key PC components, the fallout continues… Seagate Technology PLC (NYSE: STX) is down 2% at $25.81 against a recent high of $32.55 and Western Digital Corp. (NYSE: WDC) is down 2% at $33.82 against a recent high of $44.44.  We warned investors not to chase those on the last round of good news as it should have been anticipated at the end of 2011 and in the first quarter of this year.  It may seem a bit of a surprise, but the US king of DRAM via Micron Technology Inc. (NASDAQ: MU) is down only 0.2% at $5.70 because it is already down so much from the highs of $10.23 over the last year.

It goes without saying… wrecking balls swing back and forth, and the damage is severe.  Dell has become technology’s wrecking ball and having a “LOW P/E VALUATION” is about as relevant as gold to a dead man today.

JON C. OGG

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