Sunday, February 4, 2007

A Message from Michael

It's just one of those strange coincidences that Michael Dell's last name and hell have a very similar sound - the sound of a rhyme. Dell sent an email to employees late Friday outlining a variety of tough changes including the elimination of bonuses in 2006 and a reduction in managers read about that here. While it will be hellish for those who will be directly eliminated in the shuffle and all who will be reassigned to the thrill of getting a new boss and new ways of doing things, etc, if Mr. Dell can actually pull off a reversal of big company bureaucracy, he will have accomplished a near miraculous feat. Man, could I tell you stories about bad management and bureaucracy in my years in the corporate management ranks, but I won't go there except to say that once 'it' siezes a once nimble company 'it' takes hold like a hand that accidentally touches a 600 volt third rail. 'It' doesn't let go and the results are devestating. Wall Street realizes that Dell has his work cut out for him. The chart ahove shows that large ugly red candle which portrays a stock that started the day up, but finished lower on the fear that it will take quarters, perhaps years for Dell to regain its lost magic. Mr. Dell is also up against changed dynamics in the overall computer industry which will only make his job tougher. Here's a longer term chart going back to 1999. That's all there is to work with. Prior to '99 it was all a parabolic 70-degree upward rise for the stock.
What I find especially grim about this chart is the last time the 50 week moving average slumped below the 200 week moving average it took almost 3 years for Dell to recover. The standard deviations are compressed this time around with less volatility, but the pattern is amazingly similar with last year's low below 20 and then rebound looking mighty similar to those dicey days back in early 2001. This is one stock I won't be rushing out to buy.

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