Dell, Icahn: Walk away from Dell

5 reasons the computer maker's stock is worth less than $9.

By Jim Cramer Jul 19, 2013 9:42AM

thestreet logoMemo to Michael Dell and Carl Icahn: Walk away from Dell (DELL).

 

After what I heard Thursday from all of the tech companies I follow, Dell is worth perhaps less than the $9 per share this whole fiasco -- this huge sideshow to the reality of this company and this industry -- started at.

 

First, if you listen to Intel (INTC), if you listen to Microsoft (MSFT), you know that the personal computer is in a horrendous secular decline. Sure, some of it is being replaced by tablets and cellphones, but the bread-and-butter personal computer is going to decline by more than 10% this year and I believe it will be even worse next year. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

Attempts to revive it using the Microsoft Surface have failed already. That's what happens when you take a $900 million charge for a new product before it's even in distribution. That new device, important for the consumer business of Dell will, it sounds like to me, be off the shelves and gone this time next year.

 

Second, we know from Intel that there are no chips so exciting as to mean anything to most users, individual or the enterprise. Sure Moore's law could be alive, and the chips keep getting smaller and smaller. But unless you work at NASA and want to put a man on the moon, you don't need that power.

 

Yes, Intel says when it gets the new chips needed to power the ultra-mobile units that come out in the fall, maybe there will be a bump. But it is more likely that Lenovo will come up with some cheap device that will cut Dell's profit margins to shreds.


File photo of Dell computer logo (© LM Otero/AP)Basically, Dell is selling color TV sets at this point. That's right, big color TV sets, and not even the sexy flat panels, just the ones that Zenith, Admiral, JVC, and Philips used to make. The ones that they can't give away at Best Buy (BBY), except when your kids go to college and they insist on a TV -- that is if they even bother to hook one up any more as they are conditioned to watching on tablets these days.

 

Oh, and let's be sure, Apple (AAPL) has the equivalent of the sexy flat TV panel sets with its personal computer division, but even it has become a back-to-school item -- for the schools that support Apple, that is.

 

Third, the absurdity of believing that the server business of Dell -- coupled with its big service contracts -- can be the bedrock of new Dell has been defrocked this quarter. It's all cloud, and in the cloud, we don't need anything special in a laptop. Plus, the clients for Dell, many of whom are governments and universities and many of whom are in Europe, are about as bad as you can get. They are all strapped. They can hold off, certainly long enough to see Dell use up all of its cash and go into chapter 11.

 

Fourth, there is absolutely no doubt in my mind that Hewlett-Packard (HPQ) can afford to give away personal computers to wipe out Dell in a two-year period. Remember, Meg Whitman has reinvigorated the balance sheet; it can be done without crushing Hewlett-Packard.

 

Finally, we know from SAP (SAP) that China and Asia have has slowed for enterprise hardware and software so the biggest growth market out there has really gotten hammered in the last few months.

Given all this, and that the switch to mobility has happened so fast that neither Intel, Microsoft nor Google, as of Thursday night, has seen it coming at this velocity, Dell is probably doomed even if it just stays public, let alone if it used all of its cash to buy the company or a huge chunk of it. Only a moron would take the chance with the debt it has to issue.

 

Right now, one of you, Icahn or Dell, must blink. No one wants to be stuck with this company. Let it come down perhaps to $8 and hope that it survives. I don't know if it will even if it stays public or doesn't ladle on the debt.

 

Yes, indeed, it is that bad.

 

cramer

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long AAPL.

 

 


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30Comments
Jul 19, 2013 11:15AM
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MSN is somehow rotating our access to these blogs. Sometime you see them and sometimes you don't. I don't know if they are doing it based on the users location or what. For instance TOG your message says it was posted 41 minutes ago but this story just showed up on my browser. I get the feeling MSN is not real happy with us nasty ole bloggers.
Jul 19, 2013 11:36AM
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Lamest analysis ever. HP and Apple are going to dominate the PC business? Did I miss something? Or is Cramer just trying to pump up his personal holdings?

"It's all in the cloud." Yeah, right. How many years have I been hearing that? He's just parroting industry analysts, but not thinking. It is simple minded. 

A lot of software is not available "in the cloud," especially proprietary systems. In fact, we are so far from this being a reality, at least in the enterprise business space, that I don't see when it is going to happen. For gramps that just checks email and needs to compose documents once in a while? Sure. But when did gramps ever need anything "special in a laptop" to begin with? The people that need power in their computers will continue to need it, the "cloud" is a pipe dream for them - for now.

And many organizations' security/privacy concerns are not met by the vendors providing such "cloud" solutions, particularly governments, universities, and Europeans - the very groups he points out are Dell customers.

This is truly a sales job - and a poor one at that.
Jul 19, 2013 1:28PM
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Little Beaver's post where he rids the world of his JAP

 

JILL:Let me answer your questions.My name is Brent.I look like a young Roger Moore.

I could pass for 35 years old.I`m 6`1.I went to school and college in Ohio.I worked my

way up from a stock handler to Distrabution manager after promotions which meant

transferring to Las Vegas.You asked if `m married.Not really.I love golf,I`m a scratch golfer and lve Tennis.Tell me what you look like.

Jul 19, 2013 12:57PM
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Honestly one of the liberals on the blog should have a visit with Regal.... I'm worried about him/her.
Jul 19, 2013 1:52PM
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"I get the feeling MSN is not real happy with us nasty ole bloggers."

 

Too bad they don't WAKE UP and hire the better blog writers for counterpoint. They would still get the advertising dollars they Jones for and likely more readers. America isn't made up of investors and the majority are victims. Relevant journalism doesn't paint lipstick on a pig and recommend putting your dinner money in it.

Jul 19, 2013 11:52AM
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Ok here we go ....basically Bobo is saying that you can short dell down about 40% or so as in his not so humble opinion they are toast .....one of his rationales being that HP can afford to give away personal computers for 2 years .....seriously WTF ....so should Ford give free cars for 2 years to take market share from GM.

This is from the genius who said buy Gold (twice) at it's market high of $1900 .....

The genius who called Lenny Dykstra one ofthe all time great investors !!

CNBC and MSN this fool weakens your credibility every day.
Jul 19, 2013 10:26AM
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Must be a  Holiday weekend, that I don't know about...

Cat's got everybody's tongue.

Nothing about Dell or Icahn, huh ?

Nothing about Detroit, eh.?

You guys okay with Barack, right.?

Everything Benny is on the back burner, must be?

Markets and CGT, will probably be okay..

Fatty's okay isn't he ?

I know now that Ice Cold, has a great interest in China..

I've got nothing...

Jul 19, 2013 12:19PM
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Well I have a VA appt...And got to get AC recharged on truck.

All new tires on most vehicles....Good to go.

 

You guys have a nice day and weekend, I'm probably gone most of next week.

Fatty Cakes, will have to find someone else to kick around..

 

Ciao....Be gentle to each other, remember we are all brothers and sisters or cousins or something.

Jul 19, 2013 11:54AM
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Interesting Cramer that you continue speaking of technology and the so called cloud when you are clueless.  Computer companies come and go because they are bound to a particular technology delivery system.  When Singer shuttered it's System Seven (that is right, the sewing machine company), Exxon it's personal computer, Dictaphone, AT&T all jumped out to make way for portability and the "sky was falling".  This is old news.  Transformation in technology is a natural order and embraced by those who follow Moore's Law.  Home cloud computing here we come.  Prepare for the technology boom.
Jul 19, 2013 10:35AM
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no retog - it's just that no one gives a fly about dell or HP.

 

how's the fishing season your way?

Jul 19, 2013 2:31PM
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   Just a point of interest.  For those that  think NTW is just blowing smoke on this blog about the new world order, Jesse Jackson has called for the U,N. to look into the Trevon Martin case.  Whoa!   are we no longer American citizen talking care of our own problems? It seems that may be coming into question.

Jul 19, 2013 1:02PM
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My take on the cloud....
Right now with PC's it seems to me you have a choice between memory or speed.  you can by a traditional PC that has a huge hard drive and never have any memory problems, or a solid state hard drive that has much less memory but a much faster processor.  The cloud could be sold as the answer to the memory problem of the solid state, perhaps makers of both should get together, buy a solid state and get a discount on 1 year of the cloud type of deal?
Report from Toronto....
Having a below grade garage is a bad thing, it means you have 8 to 9 ft of water in your basement.  Thousands of claims, will end up costing more then the Calgary floods as it has so many people in a smaller area.  Also, worst traffic in Canada by far.... stupid Toronto.
Jul 19, 2013 12:10PM
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Yeah some days there's minor probs with MSN, gets frustrating.

But I go to other sites also, gives me break from the political stuff.

 

Couldn't sleep after Casino trip last night, watched Cramer in middle of night, part time while studying info on "new dinosaur" from Utah that has been discovered.

 

Cramer blatting with the CEO from SAP about "cloud computing"...They will push this shidt until everyone has to, or gotta have....Probably won't be me.

Jul 19, 2013 12:03PM
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Yeah, I want to see someone or two stay in the PC biz...We have HP systems PC and Lap...

Hardly ever use the Lap..

Fishing very good at pond w/ G-kids and Dads, caught about 20 fish in 45 to an hour; The ones that didn't get off....Wore me out....One girl got hook in leg, pushed through cut off barb...

Like I said the hour or two wore me out running back to house with mower, finally started driving truck down to it....Not fishing much on Lakes, no time. Garden, golf, casinos and here or researching and reading....Too damn hot to do anything.

Jul 19, 2013 11:50AM
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No surprise at all this morning.....Not so good earning news, several days up in a row and manipulators pulling out their little hair they have left on their heads so, we are drifting down....Oh well, cant go up every day....Lets see if we can minimize the damage this afternoon...That's life down here.
Jul 19, 2013 1:48PM
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Buy TOG.  See you soon.

 

I'm out of here for a week.   The wife and I are leaving tomorrow on a 7-day cruise to Alaska.  Stopping in Ketchikan, Sitka, Juneau, and Victoria, BC.  The ship has got an ourdoor pool, an indoor pool, lots of hot tubs, bars, spas, and FOOD.

 

Don't worry TOG, the ship also has a casino.  Let me at that dice table.

 

The wife will have internet access (when available), but I won't.  Better to be unplugged for a week.  Somehow Detroit will just have to get along on its own without our help.  I'll be back here July 29.

 

The ship sails tomorrow at 4:00 p.m.  Yar mateys!

Jul 19, 2013 1:41PM
Jul 19, 2013 12:30PM
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Until Moore's laws get us a cheap chip-set that puts the power of a PC\laptop into a tablet then the tablet is very expensive toy. The closest tablet to that threshold right now is the Surface Pro. I have an RT and it is a great device, not a PC replacement but a device. I can do most of what I need to do for communications (outlook , skype, etc.) and consuming (Word, excel, Adobe, browsing)  data on it but it just doesn't cut it for authoring complex objects (App programming). However, it is far superior (IMO) to most of the other "devices" currently on the market and I'm including having Win 8 as the OS in that opinion. The fact that it didn't sell like hotcakes has more to do with branding than functionality. The "traditional" thought process around deciding to purchase an RT was probably "It can't be a cool device if it comes from an uncool company". Whatever devices come next from MSFT, that will become the greatest challenge to overcome.
Jul 19, 2013 12:16PM
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Right Jim,  Ican's just a fool and you're not.  Let's see how this plays out and then we'd like to hear you back pedal. 

 

 Have you ever posted your actual portfolio results from year to year?

Jul 19, 2013 12:13PM
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Invested in Dell years ago...Have only had HP in Mutual Funds...Neither now, and doubt I will.

Don't remember if we made or lost money...Way back in the day...Har,har.

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