Dell's quarter indicates a slowdown

We'll see lower stock prices until large companies say the downturn is only temporary.

By Jim Cramer Aug 17, 2011 8:28AM

jim cramerthe streetSo far, Urban Outfitters (URBN) is in a class by itself in saying that the last 10 days leading up to its conference call were disastrous in at least one of its divisions, Anthropologie. I am still reeling from that startling statement and have tried to back it up with others to be sure that URBN isn't something unto itself.

 

I didn't get it from Home Depot (HD), which didn't have anything negative to say at all. Last night, when talking to Steven Sadove, the CEO of Saks (SKS), I heard that the days leading up to the quarter have been business as usual, consistent with excellent metrics. I didn't hear it from Howard Schultz on Tuesday either, with Starbucks (SBUX) seeing no slowdown.

 

But last night on the Dell (DELL) call we got lots of evidence that consumer demand is "weaker and a bit more uncertain," which translated into a hideous outlook: revenue growth going from a 5%-9% increase, totally respectable, to 1%-5%, completely unacceptable, hence why we are seeing so much selling.

 

Their Urban Outfitters moment, reiterated several times like on the URBN call, specifically identifies "the last few weeks" as the time frame.


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Now, of course, it's easy to say that Dell's problems are Dell's and therefore Apple (AAPL) is taking share. We know that rap.

 

But I think if we are on recession watch -- and that's certainly the case after the budget fiasco -- Dell is an important indicator of a slowdown.

 

Here's how I think things will shake out. There are enough companies that aren't seeing a slowdown that prices may have come down too far during the big decline. But there are enough that have seen it that we didn't deserve the big repeal of the decline.

I think it will cut to lower prices until we see large companies like Dells say it was temporary.

 

Given that we just saw this decline, that's highly unlikely, and I don't think we can make up higher ground of any significance from here until we know more for certain about these fated last 10 days.

 

At the time of publication, Cramer was long Apple.

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites.

 

Follow Cramer's trades for his Charitable Trust.

55Comments
Aug 17, 2011 9:03AM
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Market soars, market crashes, oil up, oil down...I think Wall Street has meetings before the market opens to decide which area to create a false shortage or hope & they invest their money to make themselves more & the rest of us worry how to pay the next bill or if we will still be employed!!!!  Great job by Wall Street & our Government keeping an eye on them...lol.
Aug 17, 2011 10:59AM
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Are my number wrong?  The starting wage for new jobs has dropped from $15/hr to $10/hr or 30%.  Gas has gone up 32% and Food 40%.  Tax breaks for new hires has created (in bank industry anyway) revolving jobs, hire, fire, hire at $6,000 a hire and employees don't even reach 30 day mark, that $60,000 to $ 72,000 per job opening, create 10 phony jobs and get $720,000 in tax breaks.  Close to 14 million under or unemployed.  1/6 of nation on food stamps (soup line).  Required to speak spanish for a new job.  8 million homes yet to be listed as foreclosures, our community has 20% of home on hold for foreclosure as not to flood the market and the next best thing the government can do is to give big banks (under a different name) money to buy them at 1/4% or .25 interest rate, then rent them back to prior owners?  Credit being use to supplement income (debt) in the amount of $2 Trillion.  The government does not want to pay IOU's to Social Security System.  Medical Industry at 200%-600% mark ups. .01% of population own 84% of wealth.   I wonder why consumer confidence is down.  It really is not my confidence that stops me from buying, ITS MY EMPTY POCKET BOOK, STUPID.  SUPPLY AND DEMAND.  SUPPLY JOBS AND DEMAND WILL FOLLOW. STOP SUPPORTING STUPD IDEAS THAT SUPPORT THE .01% OF POPULATION. 40% OF AMERICANS ARE BELOW POVERTY LEVEL, WAKE UP OR THE SLAVES WILL REVOLT.
Aug 17, 2011 11:02AM
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Cramer needs to either make up his mind or stop talking. We are/are not in a slowdown. The market will/will not rise/fall. The future is bright/grim. I'm tired of listening to him talk on BOTH sides of an issue. So I don't listen to him AT ALL anymore.
Aug 17, 2011 10:34AM
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Stimulate the economy.... Fire all of the politicians and Stock traders and start with a better governing system. Stop making laws that protect the stupid and stripping the Americans of their freedoms they once had. Quit making everything an analysis and get out there and take a real look at where the problems are. The stock broker that makes 250,000 a year or more is not the place to start. Try the real Americans, blue collar workers.
Aug 17, 2011 9:26AM
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Here is the deal, there was a time that this country was not based on a stock market. Who decided that this country's financial future depended on the status of a company's stock or the how the Euro or Yen closed at? Companies start and fail everyday, so what. The issue is companies found ways to get consumers to help in paying for the CEO and executives salary. The stock is born.
Aug 17, 2011 10:15AM
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The days of slapping a motherboard in a steel / plastic case for huge profit margins is over.   Dell is another Blockbuster in that it never invented the next big thing.

When people can buy a used Dell with Win XP, 2GB of Ram, 3ghz and a big hard drive for $100 to look at photos, their email and edit a word doc for school, why do they need to call Dell and spend big bucks?

Tablets are here to stay and Dell is way behind the curve.  Cramer it has nothing to do with consumer demand, they just don't have anything to sell.
Aug 17, 2011 9:52AM
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Cramer obviously hasn't been to Best Buy lately.  PC's are definately no longer the hot item.  They're  still for sale and all that.  But the buzz is the iPad and its clones.  They are getting center stage on the display table.  Apple stock, by the way, is sitting somewhere north of $350 a share.  Dell is not the bell-weather of this economy anymore...at least not the IT/consumer side.  Give it a rest, Jim. 

Aug 17, 2011 12:52PM
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Could it be perhaps that people are finally realizing that Dell makes crap computers and are purchasing other brands???  
Aug 17, 2011 12:58PM
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I also purchased dell products for years having lived in round rock TX, but am tired of bad products and needing a Indian ( from India) translator to fix the junk i purchased recently.
Dell's growth is  slowing because they lost there way . the only thing Dell predicts is
their own failure... not the economy's


Aug 17, 2011 10:39AM
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Jimmy Boy, you are like the only kid in the Easter egg hunt who hasn't found one, KEEP LOOKING.
Aug 17, 2011 10:41AM
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What is the number one reason Dell sales are down?  It's called the Apple iPad.  Many of Dell's largest customers, school districts, are moving away from laptops and desktops and handing students and staff an iPad...

Aug 17, 2011 10:19AM
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hey cramer ill tell ya what to pay the biggest attention to and thats the biggest retailer reporting a decline in us sales ya know well ill tell ya why your speculators have a 40% traders tax on gas vituraly stopping in its tracks just keep it up for 6 more months and see what happens . its the price of gas stupid
Aug 17, 2011 11:55AM
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Dell has not made a great product in sometime, and in hard times the buyers become more discerning.

Hmmm are we having a recession soon or not. is growth maybe plus 2% for the next few qrts or could we see a coulple of minus 1 quarters in there. Its like watching an old man on a bad bike ride up hill What happens if he hits a speed bump will that make him stop, what happens if the soft tire really goes flat........

 

So how do we compete in a global economy

1. Education Education Education   we still have to import folks for alot of high paying jobs since we have a shortage of scientists, engineers, doctors etc

2. build infrastructure in america not afghanistan, or anywhere else 

3. develop a national energy policy we should be selling oil not importing it

4. get our debt under control  about 4 trillion in debt reduction this decade is minimal. Remember the Obama/Boehner plan that would have about covered it

If we do these step we will have anice economy in a few years until then we are just a bunch of old men praying the leaky trie will not go flat

Aug 17, 2011 10:50AM
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Dell has not kept up with the times.  Ipads are making PC's so less desirable.
Aug 17, 2011 2:00PM
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I have been a loyal customer of Dell for many years.  But, I have noticed a BIG drop in service, support, and quality.  I am sure the economy is partly to blame; but, I will not continue with Dell if they don't realize that they are hurting their loyal customers and their reputation.  Dell should return to the level of professional quality that they had before they became to big for the average consumer.  Thumbs down Dell...

Aug 17, 2011 12:16PM
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Cramer is not the sharpest knife in the drawer for just making his assumption after this one company.  Dell is not a good indicator because they have not made a good product in over 10 years.  People are starting to figure this out and they are switching to Apple and other companies that are putting out a better product.  (HP, Toshiba, etc.)  This decline in Dell will hopefully stay in place until they get their act together and decide to build a good computer again.  Besides the Dell point Jim has been far too Bearish lately in his outlook.  Maybe he will be happier with his stock picks next week. 

Aug 17, 2011 12:32PM
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Ken101a has a point here other than having a political slant...I saw the same thing happen in the Silicon Valley.  Management came to us professing a new manufacturing model by outsourcing all legacy products and introducing new designs onto the shop floor for a short period.  The strategy was to stabilize the new designs and recoup costs but all depended on the demand & time-to-market.  Well...it was all creepy from the start handing over our diagnostics for the legacy products & eventually giving back-door access.  From what I learned from this experience is that the bottom-line decision by management was not to invest or allow maturation in automation, Lean & Six Sigma practices and their people.  Now we have an out of control national debt and wiped out the middle-class...The wealth makers now have decisions to make and the right one would be to invest in their people at home...
Aug 17, 2011 12:21PM
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It is all very simple in the eyes of the American public...It is called "SCARED STRAIGHT" !  Trust no one and thanks to the B***S*** the  media prints with 1/2 truth and  1/2 BS....... be very very careful you silly rabbits!!
Aug 17, 2011 10:57AM
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Dell is garbage, and people are just starting to realize that.  Instead of people buying "throwaway" computers, they're looking more at quality and long-term.  Time to find a new company to use as a "recession-meter". 
Aug 17, 2011 11:03AM
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I have bought a Dell laptop and desktop previously.  However, last laptop was an HP.  More bang for less bucks!
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