Dell Hits $12 a Share, Really?

Dell Inc. (NASDAQ:DELL) shares are down almost 8% today and fighting to stay above $12 a share after the company gave a debbie-downer narrowing gross margins during Q2 announcement just in time for Friday's (7/17) shareholders meeting. However, 12 is the magic number for Dell, at $12 a share puts DELL at a P/E of 12, maybe its time to turn that frown..upside down.

WHAT WE KNOW

Dell Inc. today said they are expecting narrower gross margins during the second quarter as it meets the growing demand for low-end devices such as netbooks.  Rising prices of components is also a contributing factor. Dell is forecasting a slight sequential revenue increase in its second-quarter 2010, which ends July 31, but a “modest decline” compared with second quarter 2008. Specific numbers were not offered up, yet the selling is going like crazy today with volume almost double the average and its not even noon yet.

Chief Financial Officer Brian Gladden disclosed the forecasts in anticipation of an analyst meeting Tuesday and a shareholder meeting on Friday.

Dell (NASDAQ:DELL), the world’s No. 2 maker of personal computers, reportedly has plans to acquire a company in the data storage services business this summer. CEO Michael Dell has said that he wants the company to diversify with service-based products, an approach that has proven successful for Palo Alto-based Hewlett-Packard Co. (NYSE: HPQ).

Dell recently hired a former mergers and acquisitions director for IBM Inc. and has more than $10 billion in cash while tech company valuations remain depressed during the global recession. In January, it acquired the Microsoft Corp. consulting and solutions portion of Allin Corp. in a stock deal worth $12 million.

Meanwhile, Dell is reducing annual costs by more than $4 billion by the end of fiscal 2011 and expecting the market for network upgrades to rebound from sluggish sales during the recession.

“We continue to believe that customers are deferring IT purchases, and that we will see demand return to more typical levels at some point,” Gladden said.

ADD DELL TO YOUR WATCH LIST

Fellow Masters, Dell is doing everything right for shareholders and should this stock continue to drop and fall below $12 a share, its worth picking up a few shares.  Dell is a healthy company and its balance sheet is amazing considering the state of the economy and everything else under the sun, don't let the Dark Side make you panic.  Still not convinced?  Don't be, Friday's shareholders meeting could bring worse news, let's hope we get lucky and Dell gets into the $11 range, then its an all out 1-2-Shabdoo Rick James Buy.

Disclaimer: No positions in DELL at this time.