Dell Computer Corp’s shares tumbled 12% on Friday in heavy trading after analysts voiced concern over the strength of the company’s fourth-quarter results. BancBoston Robertson Stephens and Salomon Smith Barney each issued reports that highlighted sales gains in the corporate space by competitors such as IBM, Compaq and Hewlett-Packard. As those companies and others have adopted some form of direct sales models and reduced costs, Dell is finally beginning to see some erosion in its competitive edge, as well as its average selling prices. Lower component costs for Dell’s rivals are being cited as a prime factor in the increased pricing pressure. Dell is due to report results for the quarter and year Tuesday and the fast-growing PC maker is expected to post earnings of $0.31 per share for the quarter, according to First Call. While neither firm said Dell would fall short of the consensus, it may only meet expectations through cost controls of its own. The most eye-opening comments came from analyst Dan Niles at BancBoston Robertson Stephens, who described Dell’s finish to the quarter as soft – in both unit sales and ASPs – and reduced his revenue projection for the period to $5.2bn, down from an original $5.5bn. Following the sobering reports, Dell shares fell $12, or 11.78%, to close very near the day’s low at $89.875. Niles also said that he could see the stock falling to $80 in the near term. Trading was frantic, with volume reaching 66.4 million shares – more than three-and-half times its average of 18.9 million and better than 48 million shares ahead of the second most active issue of the session, Intel Corp. On a normal trading day, Dell’s volume lead over Intel would be closer to 3 million.
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