Brokerages cut price targets on Dell, see PC troubles persisting

Fri Nov 16, 2012 7:10am EST

Nov 16 (Reuters) - At least six brokerages cut their price targets on Dell Inc's stock saying weak PC sales are likely to persist, and the No. 3 PC maker's shift to enterprise solutions could be slower than expected.

Dell reported a 47 percent drop in quarterly profit on Thursday, hurt by lower PC sales and weaker demand from large corporations.

Shares of the company were set to open 2.5 percent down on Friday. They closed at $9.56 on the Nasdaq on Thursday.

"Near-term stability in PCs could be elusive due to macro challenges, elongating useful PC lives, and the ongoing shift in IT dollars to smartphones and tablets," JP Morgan analyst Mark Moskowitz wrote in a note.

He cut his price target on the stock to $14.50 from $16.50.

"Dell's PC business should continue to see challenges from Apple in tablets and the company may need to make acquisitions at a rapid pace to stem the declines," Barclays Capital analyst Ben Reitzes said, and cut his price target on the stock by a dollar to $10.

Reitzes said he had "fundamental concerns" whether the company's transition to enterprise can ramp up fast enough and successfully enough to offset pressures in PC-related businesses.

Dell, once the world's top PC maker and a pioneer in computer supply chain management, is struggling to defend its market share against Asian rivals like Lenovo Group Ltd . Dell is trying to bolster growth by focusing on products and services to corporations.

In October, the company's new enterprise business chief Marius Haas said Dell intends to push ahead aggressively to grab a bigger portion of the $110 billion market catering to the technology needs of corporations.

While Dell said it expects revenue to grow as much as 5 percent in the current quarter, BMO Capital Markets said revenue and earnings declines would not likely reverse in the near term owing to weak demand.

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