Q. Are things looking up for my Dell Inc. shares? -- R.H., via the Internet
A. The world's second-largest computer-maker, behind Hewlett-Packard Co., has become leaner and more aggressive as it attempts to complete its turnaround.
It eliminated 7,000 jobs last year while adding 2,700 through acquisitions. It is reducing its product-design costs as well.
Famed for build-to-order direct sales, the firm is rapidly expanding its sales of computers through retailers. It is creating products specifically for the 13,000 stores in which its products are sold, including Wal-Mart, Best Buy, Staples, Costco Wholesale and China's Suning Appliance.
The question for investors is whether it can simultaneously increase both its retail and direct sales. Fiscal second-quarter net income dropped 17 percent, largely due to extensive price-cutting of products for retailers and overseas.
Wal-Mart has begun to test product installation and repair services in a joint venture with Dell. The two are marketing those services in kiosks in 15 Dallas-area Wal-Mart stores during the next few months.
Strong sales of notebook computers and servers, coupled with continued gains in emerging markets of Asia, Latin America and Eastern Europe, are positives for the company. It is scaling back its rapid expansion in Western Europe.
Dell recently launched a line of streamlined business notebook computers for "digital nomads," those workers who travel for a living.
Shares of Dell (DELL) are up 5 percent this year following declines of 2 percent last year, 16 percent in 2006 and 29 percent in 2005. It has little debt and more than $3 billion in annual free cash flow.
Another positive signal: Michael Dell, who founded the company in 1984 and returned to be its chief executive in January 2007, has bought about $100 million worth of its stock during 2008.
The consensus rating on Dell stock is a "buy," according to Thomson Financial, consisting of seven "strong buys," nine "buys," 10 "holds" and two "sells."
"While I am encouraged with our progress, we still have much work to do to restore our competitive position," Dell said in announcing his plans to cut costs by $3 billion by 2011. Chief Financial Officer Brian Gladden, a former General Electric Co. executive hired this year, is in charge of the belt-tightening.
Earnings are expected to increase 21 percent this year, compared with 8 percent projected for the personal computer industry. Next year's gain is projected at 17 percent versus 21 percent for its peers. The forecast for a five-year annualized growth rate of 13 percent compares with the 14 percent industrywide expectation.
Q. Is Hartford Dividend & Growth Fund worth investing in? -- V.L., via the Internet
A. Large-capitalization value funds have had a tough time of it, but this one has done much better than most of them.
A primary reason is that it embraced energy stocks and kept financial holdings relatively low. It moved money into natural gas firms such as XTO Energy Inc. and benefited from rebounds of large-company stocks such as International Business Machines Corp. and Wal-Mart Stores Inc.
The $4 billion Hartford Dividend & Growth Fund "A" (IHGIX) is down 9 percent over the past 12 months, and its three-year annualized return is 6 percent. Both results rank in the top 11 percent of large-cap value funds.
Continued... |