Warning by Piper Jaffray Analyst Hits Dell, Computer Stocks

In the debate over Dell Computer Corp.’s potential sales growth, investors are finding U.S. Bancorp Piper Jaffray analyst Ashok Kumar more credible than the company itself.

Dell shares Wednesday tumbled $2, or 4.8%, to $39.56--the lowest since February--after Kumar cut his rating on the stock to “buy” from “strong buy.”

The analyst said Dell’s forecast of 30% revenue growth in coming quarters isn’t achievable because Dell doesn’t have a strong enough business in notebooks, servers and computer systems to offset weakness in its desktop PC business.

Kumar’s views carry weight because “he often has very divergent opinions from the consensus,” said Steven Salopek, tech analyst at Banc One Investment Advisors Corp. in Columbus, Ohio.

Research firm Dataquest last week said U.S. PC shipments rose 11.5% in the second quarter, the slowest in years.

Dell told investors in January to expect its sales to grow 30% in future quarters. But in the second quarter Dell’s U.S. shipments rose 27% while global sales rose 22%, research firm IDC Corp. estimates.

Dell (ticker symbol: DELL) had no comment on Kumar’s report. The company is to report fiscal second-quarter earnings on Aug. 10.

“You’re getting so many mixed signals in the market about PC companies” and whether growth has continued to slow, said Frank Gannon, money manager at SunAmerica Asset Management Corp.

Kumar’s warning on Dell hit other computer stocks as well on Wednesday. Gateway (GTW) fell $1.69 to $52.50, Apple Computer (AAPL) lost $2.06 to $47.25 and Compaq (CPQ) fell 69 cents to $27.75.

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Dell’s Jagged Path

Shares of Dell Computer (ticker symbol: DELL) fell on Wednesday to their lowest level since February on fresh worries about the pace of personal computer sales.

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Dell shares, weekly closes and latest on Nasdaq:

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Wednesday: $39.56, down $2.00

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Source: Bloomberg News