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Dell is in Trouble

Dell may soon go the way of the Dodo bird. All the signs are there. Some of their recent announcements are setting off warning signals.

These include:
1) Announcements of additional job cuts (5,600 more jobs in addition to the 3,200 already announced).
2) Their drastic cost cutting plan. A plan in which they will try to reduce costs by $3 billion over the next three years.
3) Recent discloser concerning possible accounting errors and evidence of "misconduct", and the delay of their 4th quarter financial results.
4) Revenue of $61.1 billion at the end of its fiscal 2008, but said it cost $49.5 billion to generate that revenue.
5) The announced closing of a large manufacturing plan in Austin Texas.
6) Michael Dell's step down as CEO (returning maybe a bit too late)
7) Announcement of possible sale or spin off its financing arm; Dell Financial Services
8) The current US economic environment. Companies that don't have any of the issues above are going to have a tough enough time dealing with the turbulent times we're going through. I can't imagine how Dell is going to deal with this additional pressure.

Dell big problem is their ability to keep up with the competition. HP has really stepped things up and has put a lot of pressure on Dell's bottom line. Dell has turned from being once considered a business innovator to simply a distributor of computer parts. HP on the other hand has improved their image as an innovator and leader in the industry.

Sales figures confirm that HP is eating Dell's lunch. HP reported a 38% rise in its earnings when it delivered its first quarter report on Feb. 19. By contrast, Dell posted a profit decline of 6% in its fourth-quarter results, which came out Feb. 28. (source: Morningstar)

I think this ship started taking on water back in 2006. They've been trying to bail ever since. I think at this point it's time to abandon ship before it's too late.

Vassilios