Grand Expectations

Today on August 28 while the US stock markets were open, there were several news stories about how wonderful the earnings were at certain high tech companies. In particular there was ecstatic enthusiasm about Dell Computer's results. One analyst in Japan before the market opened  made some comment to the effect - "Dell is a big player and it's revenue beat estimates, meaning there's demand. "

Well I am really puzzled to know what demand he is talking about. From the tech news site  theregister.co.uk in Great Briton there is a detailed account of Dells latest earnings titled "Dell sees 'stability', Not Growth'. It does not give a positive picture.

Dell's year to year comparisons are horrid. Latest quarterly revenue down 22%, enterprise sales down 32%, net profit down 23%.etc. Well I think you get the idea. According to  the Register, sequential comparisons, which I would guess are  comparisons with the latest previous period, are slightly positive. But I would suspect this to be inevitable from the massive Federal government stimulus that was occurring in Dell's most recent period.  The only real surprise there is how paltry the improvement in the current quarter is when compared to the most recent previous quarter.

However Dell says not to worry. Based on this one time small improvement "they would expect revenue in the second half of the year to be stronger than the first half". Which under normal circumstances would not be very difficult considering how terrible the  first half was.

But these are not normal circumstances.

Dell also claims that it will be "distinguishing itself with customers and in operating performance" Meanwhile it plans to cut costs with more layoffs and have more contract manufacturing. Again according to the Register.

Well Dell may  certainly distinguish itself and it's product by firing employees and having it's computers  manufactured without the same company quality oversight. But it may not be in the beneficial way they anticipate.

Dell is a significant player in the pc < personal computer > market. As Dell goes, so goes the pc market. The pc market is a major player in the tech market. As the pc market goes, so goes the tech market. This is an oversimplification. But not extremely oversimplified. Simply stated, the tech area of the economy is still depressed, with minuscule improvement from one immediate period to the next, probably mainly due indirectly to unusual Federal government expenditures that are not going to last forever. Year on year comparisons are still a disaster, and are much more reliable than the period to period measurements which can be unduly affected by normal seasonal factors. In fact, though I haven't checked on this, it wouldn't surprise me that if pc sales from the same period last year were compared to the same previous period of last year, that  you might also see a rise in sales, right before the economy fell off a small cliff..

Dell and the news about Dell is  not an isolated event. For the past few months, ever since US stock markets began improving in early March, it has been the same story. The revenues and earnings are beating the company's estimate. But when  the facts are seen and compared, the result is usually the same.

Things are still getting worse.

Soon I will have another article going  into  more explanation about what I think in general has been occurring. It will be titled "Lets Pretend".

"It's a jungle out there, Willy. .. You have to be tough" - A Miller's Death of a Salesman.

Be careful, my friends.