Five Days: Good News on Economy, Except for a Dell Executive
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The economy expanded faster than expected in the last quarter of 2006 and remains strong.
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The consumer electronics giant is doing just fine now, but tomorrow may pose some challenges.
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Stocks rose slightly on Friday,  boosted by computer maker Dell Inc. DELL.O, but gains were  small as Wall Street took a breather after Thursday's rally.
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Shares of Dell (Quote, Chart) soared 8.5% Friday to their highest level in more than four years, as investors cheered the company&#39;s strong results and bullish outlook.
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If the figures from Dell Computer's last fiscal quarter hold up after a potential wave of possible corrections due to its admittedly improper accounting of backdated stock options grants, the company may not have fared all that poorly in the three-month period between the first weeks of February and May.
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DALLAS -- In the biggest executive shake-up yet after a string of disappointing earnings, eroding market share and an ongoing federal accounting probe, Michael Dell has returned to his role as chief executive officer of Dell Inc. _ the company he created in his college dorm room nearly 15 years ago.
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Mixed economic news and forecasts of weak IT spending for at least the beginning of next year caused IT investor confidence to waver this week, though upbeat analyst presentations from Cisco and AT&amp;T and online e-commerce figures brought some cheer to the holiday season.Macroeconomic news is making technology investors uneasy. Wednesday morning, the U.S. Federal Reserve Board cut its federal funds rate in an attempt to allay fears that turmoil in the housing market would wreak further havoc in financial markets. But the move (a cut of 25 basis points) was not as great as some market observers hoped for and sent the tech-heavy Nasdaq Composite Index into a decline.Uncertainty in the U.S. is depressing IT spending forecasts. &quot;The economic slowdown we see happening in the U.S. will in fact translate over to slower growth in the U.S. IT spending market,&quot; said Andrew Bartels, principal analyst at Forrester Research, on a Thursday conference call with media and analysts.The good news, Bartels said, is that globally, IT capital spending should remain strong, U.S. spending should pick up again by the fourth quarter of 2008, and a real recession will likely be avoided.ComScore, meanwhile, had good news about online spending. Almost $19 billion was spent online during the holiday season up to midweek, an 18 percent increase compared to the same period in 2006, the market research company said.Companies that appear ready to supply the infrastructure for e-commerce and Web 2.0 multimedia services gave investors something to cheer about this week.AT&amp;T, which is melding the telecom services and infrastructure of the former SB Communications, BellSouth, and the old AT&amp;T, gave a presentation that impressed analysts Tuesday, convincing many that the communications giant is poised to leverage a wide range of assets.In a research note, Christopher King of investment firm Stifel Nicolaus said that AT&amp;T has &quot;the premier set of assets in the telecom industry.&quot; Independent analyst Jeff Kagan noted in an e-mail report that &quot;10 years ago, the company was only into the local phone business and was just getting into long distance and DSL. Today, it is a full featured company offering local and long-distance telephone, wireless, high-speed internet, and even television.&quot;The presentation came a day after AT&amp;T announced that it has expanded its 40G IP/MPLS backbone network to more than 50,000 miles in the U.S.AT&amp;T shares closed at $39.46 Tuesday, up by $1.56, and continued to move up over the next few days.Cisco&#39;s analyst presentation on Tuesday also drew good reviews. The company has a good track record of predicting trends and executing product strategy accordingly. The company announced, for example, that&#160;it will debut next year its Entertainment Operating System (EOS), a platform for multimedia content for online communities. Its unified communications product strategy and expected enhancements to its software offerings should also make its product suite more central to the corporate data center.Lehman Brothers sent out a research note saying that the company is well-positioned to offer products supporting the new generation of Web technologies. Cisco shares rose $0.46 to close at $28.08 Tuesday, and continued to move up during the week.In a shaky economy not all companies and sectors will perform well, and big questions surrounded chip maker AMD at its analyst presentation Thursday. The problematic launch of its Barcelona quad-core chips, which are still experiencing production delays, has shaken confidence that the company can make an effective counterpunch against Intel.Company CEO Hector Ruiz said that the company should break even by the second quarter of 2008, helped by -- among other things -- new graphics chips. But analysts are worried that may be too little, too late, to stop a market share slide. With product sales in doubt, the promise of cost controls was not enough to win over investors. AMD shares declined by $0.13 to close at $8.84 Thursday.
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Dell&#39;s efforts to reinvent itself this year through a dramatic break from its direct-sales model, expanded services, and new enterprise offerings have shown positive early results, but some users have lingering concerns about supply chain management and support -- long-time issues for the company.Weathering an accounting scandal and a slump in profit,&#160;founder Michael Dell reclaimed the helm of the company after CEO Kevin Rollins resigned in January, quickly replacing top managers and in May announcing plans to lay off 10 percent of the company&#39;s workforce.For years, Dell was the top PC vendor in the world, an acknowledged master of logistics in a business where margins can be razor-thin. It was efficient enough to keep prices low to ward off competition without suffering big setbacks in profits. But by 2006, when Hewlett-Packard unseated Dell as global PC leader, that was no longer the case.Dell&#39;s plans to regain its former dominance have resounded in the market. The company&#39;s third-quarter results, announced two weeks ago, showed profit increasing year over year, and record revenue of $15.65 billion. During the company&#39;s earnings call, Michael Dell said the company will put products on more retail shelves worldwide while also helping business customers &quot;simplify IT&quot; and reduce maintenance costs via customized hardware, software, and services.The company has also moved to put accounting issues behind it, recently&#160;completing an internal investigation and restating its financial results from fiscal 2003 to the first quarter of 2007.The company has been making an effort to build relationships with customers and partners and deliver products that are easier to deploy and manage, said Charles King, principal analyst at Pund-IT.Last month, Dell introduced a two-tier channel program designed to give partners better access to Dell&#39;s training, marketing, certification, and online resources. The program will provide a better chance for Dell to interact and understand its partners&#39; needs, the company said.&quot;The company seems to recognize that it has bridges to enhance with customers and partners in the channel. It&#39;s not something that&#39;s going to change overnight,&quot; King said.After years of success selling PCs directly to users, the consumer business&#39; direct-sales business model hit a wall as component prices fell, Pund-IT&#39;s King said. The strategy to simplify IT is a play at SMBs that will help Dell deliver better returns in the long term than its lower-margin direct consumer business, analysts said.However, some customers continue to have concerns about the company&#39;s support and supply chain issues.Dell is having supply shortages and can&#39;t get its servers and OptiPlex desktops to individuals and small businesses in a timely manner, said Josh Kaplan, who runs a franchise of computer support firm Rescuecom and purchases parts and interacts with Dell on behalf of customers.&quot;You can acquire all the technology you want, but Dell will send hardware out blindly,&quot; Kaplan said. It will be a challenge for Dell to deliver what it calls &quot;IT in a box&quot; -- its terms for packages of products and services -- to SMBs and enterprises, Kaplan said. Dell has traditionally delivered mostly standardized systems, Kaplan said. While Dell has built systems to order by letting users select from a menu of options, it does not have in-depth experience offering customers services over the lifecycle of products, he said.Jeremy Cole, owner of Proven Scaling, a small consulting firm with offices in the U.S. and U.K., said Dell has internal staffing issues that affect its support services.&quot;Dell&#39;s sales structure is really strange. They tend to bounce your company around to a new account representative every few months who are wildly differing in experience, intelligence, and understanding of the Dell sales system,&quot; Cole said.Cole is satisfied with Dell equipment but said the company needs to show more support for open-source applications and the Linux OS. &quot;It&#39;s clear that Dell cares about Linux in that all its server-class hardware is well-supported by the Linux kernel and it has many people dedicated to making sure that&#39;s the case. However, it&#39;s not good enough just to boot,&quot; Cole said.Though generally positive about Dell&#39;s support, Jason Dunn, who runs Thoughts Media, which publishes Web sites for technology enthusiasts, couldn&#39;t resolve certain LCD&#160;monitor problems with Dell offshore support representatives. He had good experiences with Dell&#39;s PC and HDTV support representatives, so the experience varies, Dunn said.Other users have had a good experience with Dell&#39;s strategy to simplify IT. Dell&#39;s efforts have paid dividends for Bikeworld.com, a medium-size retail business in San Antonio, which saved money by cutting its internal IT person. The company uses Dell systems with Microsoft Dynamics Retail Management System, connected to multiple offices via a VPN.&quot;Businesses are in a belt-tightening mode. You can&#39;t have extra people on payroll,&quot; said Whit Snell, general partner at Bikeworld.com. Bikeworld has resolved IT problems with Dell remotely and has a contact readily available to help with problems.Dell officials were not available for comment on support issues.Overall, Dell is trying to be more proactive and helpful, said Kurt Scherf, vice president and principal analyst at Parks Associates. Dell&#39;s new enterprise support services to simplify IT, like remote management services, could, if successful, trickle into the consumer segment, which could benefit end-users, Scherf said.Dell this year has tied up with retailers like Staples,&#160;Wal-Mart, and&#160;Best Buy&#160;to distribute PCs, something competitors HP and Acer have been successful at. But if Dell wants to make sure its customers aren&#39;t tempted by HP or Lenovo in the retail market, fixing problems that some users report about its support infrastructure has to be on top of the company&#39;s to-do list, Pund-IT&#39;s King said.Building out retail partnerships changes the consumer-facing relationships for Dell, which could lead to positive changes in the company&#39;s support and services. The results are a work in progress, King said.Balancing out its business model, Dell is showing signs that renewed efforts in the higher-end business sector are catching on, with third-quarter revenue growing in the server and storage markets. The enterprise market provides better margins than retail, and the remote management services market is growing, King said. Dell is trying to address that through acquisitions and by creating a services organization and specialized products targeted at professionals and businesses.The company this year&#160;acquired SAN (storage area network) vendor EqualLogic&#160;and managed services companies&#160;Everdream&#160;and Silverback. It announced a deal with Sun to offer the company&#39;s Solaris OS.Dell has been pushing hard to improve its systems management portfolio, especially remote desktop management capabilities that could help simplify complex IT infrastructures. In October, the company announced On-Demand Desktop Streaming, a server-based platform that streams the OS, applications and data to diskless desktop clients over a Gigabit Ethernet network.By offering design improvements and bundling software and services like remote management, Dell is trying to get the focus off of price and moving to build the framework for a new business model for the enterprise, said John Spooner, senior analyst at Technology Business Research.Dell&#39;s reinvention should come as no surprise as Michael Dell is on a mission to reconstruct his company, Pund-IT&#39;s King said. &quot;It must have been hard for Dell to see a company he built falter,&quot; King said. He is putting money in the right spots, and competitors like HP and IBM will do well to keep a close eye on Dell, King said.
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If forecasts for this weekâs economic data prove accurate, the economy would seem to be getting off lightly.
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Michael Dell plans to remain the chief  executive of Dell Inc.  for "several years," he said in  an e-mail sent to the company on Friday afternoon and posted on  the Web site of the Austin American-Statesman newspaper.
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Plus: Dell delays...Novell profit climbs...Symbian spurt continues...HP profit surges. Check back for latest.
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'We will be known again' A sedate Dell posted fourth quarter results that didn't horrify investors even though its PC and notebook sales fell in dramatic fashion.â¦
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Dell Inc. will pay its former chief executive a severance package including $5 million in cash over the next two years, the computer maker disclosed Tuesday.  Kevin Rollins stepped down on Jan. 31 and was replaced by founder Michael Dell.
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Investor's Business Daily - The Business Roundtable, which includes the heads of some of the biggest U.S. companies, said its economic outlook index rose to 84.9, up from 81.9 in Q4 '06. In the Feb. 8-22 survey, 73% of CEOs polled expect sales to rise over the next 6 months vs. 69% in Q4. Capital spending plans also improved. But the net share of big firms planning to hire fell to 12% from 14%.
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As earnings reports rolled in from technology bellwethers, including Microsoft, Apple, Nokia, and Motorola, worries about the economy continued to overshadow good news this week.The fourth quarter of 2007 was strong for IT sales, but a downturn in the U.S. economy, which many analysts fear is slipping into recession, is undermining investor confidence in the sector. Share prices of technology companies have dropped since the start of the year, with the Nasdaq Composite Index sinking to pre-2007 levels.Microsoft provided some cheer Thursday, reporting a strong quarter for core products such as Windows Vista and Office 2007. Revenue for the quarter increased 30 percent year over year to $16.37 billion.Just as important as many market observers fear the U.S. is entering a recession that will affect technology, Microsoft also raised its forecast for its fiscal year, which ends June 30. Noting that Office and video game sales are doing better than expected, the company said it expects revenue for its fiscal year in the range of $59.9 billion to $60.5 billion. Three months ago, the forecast was $58.8 billion to $59.7 billion.The report, however, provided only a momentary uptick in Microsoft shares and the Nasdaq, even though other news on the software front was good.Enterprise database vendor Sybase, for example, said Thursday that it had its first billion-dollar sales year in seven years, helped by a 15 percent jump in revenue for the fourth quarter to $295.2 million. What&#39;s more, its forecast for this quarter remains strong.&quot;We have a balance in our product portfolio and a balance geographically as well,&quot; said company Chief Marketing Officer Raj Nathan.Though Sybase has a stronghold in the financial vertical market -- a sector that is in trouble -- Nathan pointed out that the company is strong in the telecom arena as well, does about 50 percent of its business outside the U.S., and is developing new analytics products that will help financial companies manage risk and do program trading.The company was one of the few that ended the week on a happy note with its share price increasing by $0.56 to close Friday at $27.44.Other companies did not fare so well, as investors jumped on any scrap of bad news.&#160;Apple got hit hard even though it reported quarterly revenue of $9.6 billion, a whopping 35 percent year-over-year increase. Investors were spooked about slowing iPod sales and a weak forecast for this quarter. iPod shipments of 22.1 million were about 10 percent below what had been expected.Apple shares plunged, dropping from $161.36 last Friday to $130.01 this Friday.Motorola had a rough week, reporting Tuesday an 84 percent plunge in income for the fourth quarter&#160;to $100 million and warning that its market-share losses would continue as the U.S. market -- the company&#39;s cell-phone stronghold -- continues to slump until next year. Company shares dropped $2.27 to hit $10.05 Wednesday on the news, and stayed below $11 through the week.&quot;Management&#39;s view of [a] recovery being a 2009 event pushes the recovery further past the horizon most investors are willing to hear at this point,&quot; said Citigroup Global Markets in a research report.Nokia, with hit products and a strong presence in Asia, on Thursday reported a 44 percent rise in profit for the fourth quarter, to &#8364;1.84 billion ($2.7 billion), on a 34 percent sales increase. A slump in U.S. sales was more than offset elsewhere. Nokia shares jumped Thursday on the news, rising $4.05 to close at $36.48 -- and then fell right back down Friday after IDC issued a report that suggested Nokia&#39;s confidence in 2008 was misplaced.In an economy that has investors focusing on the bad news, it&#39;s going to take some evidence of strong sales in the current quarter to bring confidence -- and tech share prices -- back up to where they were. The Nasdaq finished 2007 up by 9.8 percent, but in the first four weeks of this year, last year&#39;s gain has been wiped out with the index closing Friday almost 300 points down from the end of December.
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Investor's Business Daily - While rivals Hewlett-Packard and IBM struggle with change, computer giant Dell showed its consistency Thursday.
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Solid economic news in the early days of 2005 hasn't done much for a shaky stock market.