Dell shares drop 10 percent after analyst faults strategy
Tuesday, July 25th 2000, 12:00 am
By: News On 6
Data plan underplays difficulty, he says
Shares of Dell Computer Corp. fell Monday after an analyst said the company's strategy for the high-end data storage market is flawed.
Ashok Kumar of U.S. Bancorp said Dell "is seriously underestimating the difficulty" of winning 25 percent of the worldwide market for storage products.
Dell spokesman T.R. Reid said the company had no comment.
Its second quarter ends Friday, he said, which means the company is in the "quiet period" during which executives are advised to refrain from talking about events that could affect the stock price.
Mr. Kumar faulted Dell's storage strategy on two counts: the purchase last year of ConvergeNet Technologies Inc., which is behind schedule for its first product; and Dell's more recent investment in a start-up called Storage-Apps.
"Dell's investment ... in Storage-Apps is a further attempt to cover up the problems with the ConvergeNet acquisition," Mr. Kumar wrote in research remarks.
The stock was down $5.69, more than 10 percent, to $46.69 in midday trading. It closed down $5.94 to $46.44.
Dell executives said last week that ConvergeNet's problems are short-term and amount to little more than "transitioning" issues as it is folded into the Dell structure.
But Mr. Kumar isn't buying that explanation.
"If they had delivered last year as promised, they might have had a chance."