Dell, Inc. (DELL)

Dell (DELL) reported weak 1Q10 results with revenue and EPS below our estimates, with significant declines from the year ago quarter. Dell expects a modest decline in gross margin for 2Q, impacted by higher component costs, a competitive pricing environment, an unfavorable product mix and weak demand.

Although the company expects 2Q revenue to increase sequentially, margins are expected to slide as consumers shift from expensive notebook computers towards cheap netbooks and laptops. Also, reduced IT spending as shown by the decrease in sales of PCs and cell phones over recent months is likely to have a major impact on Dell's server business.

We believe Dell will continue to struggle, posting inconsistent results in future quarters. We maintain our SELL rating with a six month target price of $8.00.

Dell, Inc. (DELL) : FULL ANALYST REPORT

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