He offered three primary reasons for the bearish stance:
- He says the risk-reward is not compelling with the stock up 20% year-to-date.
- The company remains in a tough competitive position.
- Despite diversification efforts, the company is still 70%-75% tied to PCs, including peripherals, software and services.
"We believe investor sentiment on Dell shares has gotten too positive and arguably complacent," he asserts in a research note. "What we find interesting is that consensus CY12 estimates call for 2% top-line growth and a 4% decline in EPS. This compares to peers IBM, Apple, Cisco and Hewlett-Packard, where most are looking for high-single-digit to low-double-digit EPS growth."
On the competitive front, he contends that Dell is "sandwiched between lower-cost players (Lenovo and Acer) and Apple encroaching more in its core PC business as Macs and iPads gain share."
And he notes that HP, IBM and Cisco are competing more with Dell in the SMB and server markets.
DELL this morning is down 23 cents, or 1.3%, to $17.81.