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 3:16PM
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Dell's quarter doesn't indicate anything other than Dell is not relevant and has not been for years. Cramer is running a little scam on you here to try and make himself look good. Anybody who knows anything about Dell knows they are running their same ole earnings scam they have run for years. They report earnings then immediately on their conference call guide lower to reduce expectations and estimates so they can try to meet or beat next quarter. They do it every quarter and the Cramer's and analysts sit it up for them. They are in for some rough times but it's not relevant in the overall market. You don't take direction from a dinosaur who hasn't made money for it's stockholders for years.
Aug 17, 2011 3:10PM
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Currency trader, you need to look a little harder at the facts.

It was under Clintons watch that they decided all americans regardless of income should be able to buy a house. Banks were forced to make loans to those who could not  afford them. The wheels were put in motion. Now we have all these bad loans out there and the banks are being punished for doing what they were forced to do.

Corporate taxes where lowered under Bushes watch to reduce the outflow of jobs to countries with lower corporate tax rates.

Now under Obama's watch we are trying to spend our way out of debt.

And threatening to over tax corporations who will in turn move more jobs away.

Do I disagree with everything Clinton did, No.

I also don't agree with everything Bush did.

I would have a difficult time finding anything about Obama that I can agree with. Other than he seems to be determined to destroy the USA.

I am not a democrat or republican, I am a lower middle class american who understands that you can't spend your way out of dept. Nor can you tax your way to prosperity.

Get rid of the loop holes and lower the tax rates. You will create an environment where companies will hire more people who in turn will pay taxes, buy products, and build prosperity for this once great nation.

The US government  has doubled in size in less than a decade.

Most government jobs pay more than private sector jobs and the benefits are better.

Who is flipping the bill for those jobs.

Those big corporations that some are wanting to tax away.

Tax them, watch them leave, then someday we will all be remembering a time when you could get unemployment when you were laid off, and Social Security when you retired, medicare, disability or workman's comp if you were hurt, and all the other benefits many now receive. Because they will all be gone. No more corporations to tax to fund these entitlements. No more jobs for americans.

 

 

Aug 17, 2011 2:59PM
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Glad to see gold prices going up, because as gold goes up oil comes down which holds the stocks down which im turn lets the consumers breathe a little and will restore the economy to the original state to keep things leved out. That is before all of the short stockers out to get rich ruined the stock market.
Aug 17, 2011 2:56PM
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Huh?  What're you saying, Kramer?  Buy, but sell, or sell, but buy?  I think K is now trying to cover his behind, after saying we should buy just before the market tanked.  Now he is trying to blame the recession on Dell.  But if K says "actually, well, now anyway, OK I missed it previously, but the market doesn't look so good now, so maybe, well, OK, time to sell ..."  -- maybe it really is time to buy.  

As you can tell, I'm a Kramer contrarian.
Aug 17, 2011 2:34PM
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Tether, plain and simple, the economy, and country was working fine on an even keel, when GW took the reins,...all people are saying , is put the taxes back the way they were when Clinton was president. Things weren't perfect,...but we had a prosperous nation
Aug 17, 2011 2:24PM
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People need to wake up and face reality.

You can not continue to tax the wealthy into poverty.

Like it or not the wealthy supply most of the money that our government spends and borrows against.

We can not afford as a country to continue giving entitlements to 51%. That means just slightly under half the nation is supporting the rest of the nation. Get a clue. OK increase taxes on businesses and what will they do. 1st they will raise the price of their products to pay for the taxes. Who really ends up paying the tax. Then they will move more jobs to countries with lower tax rates. The USA has one of the highest corporate tax rates in the world. If you are lucky enough to still have a job today how do you think they will be able to compete in a global market and create jobs, let alone keep you employed.

We are going to tax ourselves out of jobs because so many people think they are entitled to govenment aid that the rest of us work and pay into to provide.

Where in the Constitution does it say you have a right to live of off the government.

I am not saying there are not those who deserve government aid but there are as many who don't that get aid as those who do. I see it all the time.

People who are completely capable of working even bragging how they have beat the system. Yes they have and they are also helping to bring this once great country to it's knees.

This was supposed to be the land of opportunity. Where anyone can try to live their dreams. One could build their own company and hopefully become profitable. And others would applaude, them because they provided jobs for others. Now people and our president curse them.

 

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 1:58PM
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Cramer was saying just a couple of weeks ago, after the first 500 point meltdown, before the 600 point downgrade meltdown, that he would be a buyer at these levels.   Now, it's not looking so good.

 

Nice to see that Cramer is finally coming around to a viewpoint that many of us have held for quite some time.

Aug 17, 2011 1:55PM
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Hey,..BullDogbob,...good to see someone gets it,....I think the revolts already beginning,...I hear it in the rumblings of peoples voices on the streets every day,....
Aug 17, 2011 1:55PM
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This is where Cramer's knowledge of a specific industry is lacking.  Dell specializes in the sales of PCs and small server hardware.  Large companies, more and more, are moving their servers and PCs to a virtualized environment.  This is a software solution that uses large SAN and Unix server hardware (think big IBM and HP servers) and installs operating systems on slices of disk on a SAN rather than installing individual servers and PCs on individual hardware.  VMWare is going to continue to cut into Dell's business to the point where they'll rely almost solely on consumer spending over corporate spending.
Aug 17, 2011 1:48PM
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Sort of an "Atlas Shrugged" moment.
Aug 17, 2011 1:33PM
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Whats worse than finding a worm in an apple you are eating,  finding half a worm.

 

Jim,  I wish you would shave so I could see what you look like,  or---, are you trying to tell us something?Smile

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 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 12:32PM
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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 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 12:04PM
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Jim may have a point and really trying to help out here...I've noticed that silver (SIVR) spiked a few months ago and has not recovered.  This metal is used in a bunch of manufacturing processes across industries and the price might be reflecting it's demand.
Aug 17, 2011 11:58AM
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When we off-shore jobs, we don't just send a Drawing to be manufactured.  We send Engineers, Methods, Equipment, etc.  Another words, we send away American innovations of many decades.  Acer Computers is a great example.  Dell and HP began having their Computers manufactured overseas, which handed this technology to the Asians.  Now Acer is outselling HP and is quickly overtaking Dell as well.  WE AIN'T GETTING THIS TECHNOLOGY, OR ANY OTHER BACK AMERICANS!  Thank Republicans and the US Chamber of Commerce for ruining America......  It ain't the Dems or Independents that gave our Technology away people..... fact!

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

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