Tuesday, November 23, 2010

Black Christmas For PC Chips?

It is good practice for investors to cast their information nets as wide as possible to monitor their holdings and make better investment decisions. To that point, although Dell (Nasdaq: DELL) did not have a bad recent quarter, some semiconductor investors may not be so happy with some of the details. Reading tea leaves like this is hardly a perfect science, but there were a few scattered details that could become a problem. 

PC, Or Not PC?
In many respects, Dell had a solid quarter. Margins were particularly strong and the company produced solid operating leverage. Looking through to what drives chip demand, though, the picture gets a little bit murky. Overall, desktop sales rose 21% annually but fell 6% sequentially and notebook ("mobility") sales were up 16% and 3% for those same respective periods. Moreover, stripping ASP growth out of the equation makes the unit growth a little more concerning.

On top of all that, management's comment that the "refresh cycle is in full bloom" is a little odd, given that sequential guidance for the fourth quarter was not that great. Again, this is
not about Dell's performance - the issue is whether or not there is still solid PC and notebook demand sufficient to power the chip stocks that supply the market. (For more, see 4 Cheap, High-Quality Stocks.) 



Please click the link for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Whither-Or-Wither-For-PC-Chips-INTC-DELL-NVDA-MRVL-QCOM-ATML-ONNN1123.aspx

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