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Not everything is computing at Dell

Jeff Tyler Mar 30, 2007

Not everything is computing at Dell

Jeff Tyler Mar 30, 2007

KAI RYSSDAL: Sometimes you have to read between the lines to figure out what’s going on. As was the case with that China announcement today. Other times, it’s right there in black and white.

Dell computers says an internal accounting investigation has uncovered evidence of misconduct. Add to that the fact that the Securities and Exchange Commission is poking around the company’s books and you’ve got just about enough information to make investors really nervous. Marketplace’s Jeff Tyler explains.

JEFF TYLER: Dell has not clarified what kind of “misconduct” has been uncovered. And that’s left stock analysts guessing: How bad are the skeletons in Dell’s closet?

Morningstar analyst Rick Hanna says the company is giving investors little to go on.

RICK HANNA: They haven’t filed a quarterly report for over three quarters now. Think about an analogy. We’re kind of driving in the fog and it’s hard to see very far in front of you, because there’s not a lot of light that’s being shed on the situation.

Morningstar rates management practices at various companies. And Hanna says:

HANNA: They grade relatively poorly, quite frankly.

On the Morningstar report card, Dell’s management gets a “D.”

In terms of consumer satisfaction, the company isn’t looking so hot either. A new survey shows Dell is losing PC customers to other brands.

Analyst Gary Arlen is president of Arlen Communications.

GARY ARLEN: There’s a sense that Compaq and HP, which are owned by the same company, are really picking up market share and market interest. So Dell has a lot to do both on the marketing front, as well as the financial front.

Taken together, Dell might not seem like a very attractive stock. But despite the dark clouds, Morningstar analyst Rick Hanna says the business model is solid and the stock is under-valued.

HANNA: As an example, they’ve probably got close to 5, $6 a share, just in cash, sitting on the books. They’re still incredibly financially healthy. I mean, this is still a very, very solid, very strong company.

On a rating of 1 to 5 stars, Morningstar still gives Dell its strongest recommendation: 5 stars.

I’m Jeff Tyler for Marketplace.

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