Famed short seller Jim Chanos’ comments about Dell are looking spot on after the PC maker reported first quarter earnings. Chanos recently predicted that PC makers like Dell would look cheap the whole way down…we’re about to find out really quick, because Dell is in free fall!
The trend at Dell is even worse than the market anticipated prior to their Q1 earnings release (via StockCharts.com)
Here’s an excuse-laden infographic from Dell Investor Relations that sums up the misery (hat tip ZDNet):
It’s the second bullet/excuse that I (and the market) take exception with – in reality, consumers are prioritizing smartphones and tablets because it’s all they need. This is not a budget issue – it’s a technology fit issue. I think most people are going to eventually end up with one computer, one tablet, and one smartphone – and unfortunately for Dell, the computer is increasingly a Mac!
I think Chanos is right – Dell is toast. You can toss them in the bin Kodak found itself in when digital cameras came out – though Kodak made a valiant run at digital, and it doesn’t appear like Dell has the engineering talent to even make things interesting. Engineers I know who have worked with Dell directly tell me there are “maybe 25 good engineers left”, and the rest have left. A disastrous recipe for a technology company.
In tech, earnings (and stock) performance usually lag product quality, and usually by a longer time than is deserved. Dell’s products have been in a downward trend since the late 90’s, and it appears the share price has finally caught up.
More on Dell’s issues – a Bloomberg clip discussing the impact of the iPad’s success on Dell’s core business: