"Sell" Computers

One of the most startling pieces of news I've seen on the tech side recently was the decision by Citigroup last week to rate Dell stock as a "sell." Turns out that in the ever-twisted world of Wall Street, Dell's high margins (a situation that zillions of companies would kill to have) aren't as important as the drop on its sales and market share. In short, the Street wants Dell to sell a lot more computers and not worry so much about the gross margin (i.e., the amount it makes per sale). It's wanted the same things of other companies such as Apple, and really the only punishment that Wall Street can exact is actions like the "sell" that put a hit on the stock price. Dell may decide to bet that its strategy is fine and that the stock price will recover.

This is all happening mainly with desktop PCs. So what's it mean to you, the server buyer/administrator? Well, one ramification could be that Dell decides to comply with the Street's wishes and lower margins on its desktops to get more machines out there and sold. (Other income sources that come with increased market share, like support contracts and other services, would help ease the pain.)

But it doesn't have to make the same decision on servers, which can remain a high-margin item for the company. Dell could easily decide to cut some prices on servers, but only slightly, and get more of those into the market as a way of recovering some of the margins it has to give up on the PC side. I'll bet right now this is the way Dell chooses to go...which means that you may want to keep your eyes open for some Dell server sales real soon.