J.P. Morgan analyst
Why a downgrade now? Moskowitz indicated that 2009 will be a weak and turbulent year for the PC business, and Dell has almost every bit of its exposure in that area. From a market category perspective, the $700 laptop to the $10,000 corporate server -- and everything in between -- will get hit this year. Unlike competitor Hewlett-Packard Corporation (NYSE: HPQ), Dell does not have a division that can subsidize its PC business. Its only business is computers (of all kinds, of course). Moskowitz's ratings downgrade from neutral to underweight underscores this notion.
Will Dell face new costs and entrenched competition should it venture more brazenly outside the PC and computer hardware market? Sure -- and that could cause the company to dip into its cash register, dragging down profits in the short-term. With consumers strapped and spending less, and the replacement computer hardware cycle being deferred in many companies into 2010, Dell's 60% revenue exposure to these markets is a problem, concluded Moskowitz. Although Hewlett-Packard may weather the storm way better than Dell, at least #3 global PC seller Acer of Taiwan will see much of the same result, as it's more exposed to the consumer market than Dell is.
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