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Why Dell's a Winner, With or Without Perot


Yesterday's sell-off is an opportunity.

Crazy day yesterday. I didn't make it home till after 9 p.m., thanks in part to a bus ride from H-E double hockey sticks. Why is construction work always in full swing during rush hour?

The Hang Seng closed 1.06% higher while Nikkei was closed on holiday. Europe was in positive territory earlier this morning. And here in the US, we're currently trading higher.

Here's what I'm seeing this morning:

Dell Corporation (DELL):
It looks like Mike is whipping out his wallet.

The talk yesterday was about how the company intends to scoop up Perot Systems (PER). And I wanted to weigh in.

1. I like Dell and I see some opportunity here. Perot Systems is a good company and the pickup, assuming all goes smoothly, could end up being a big positive for shareholders because it will better enable the company to go head to head with Hewlett Packard (HPQ). There's also the potential for cost savings and a bottom-line goose down the line.

2. Regardless of whether or not it had tried to wed Perot Systems, I still like Dell because I think it has excellent growth potential over the next several years. Yesterday's sell-off is actually an opportunity.

3. With that in mind, Perot isn't a tiny catch; things could go wrong at some point. But like anything, with opportunity generally comes risk.

Incidentally, Justin Sharon points out in Upgrades & Downgrades: Dell's Not So Swell that Credit Suisse lopped its rating from Outperform to Neutral.

AMR Corp (AMR):
The American Airlines parent company intends to offer up some 30 million shares of stock.

Some thoughts:

1. Will it need to raise cash at some point down the line? What about dilution? It seems AMR's management is saying it thinks the stock price is fairly valued.

2. That news, in combination with the losses that are expected, is really going to be a big draw for the stock. (Note sarcasm.)
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No positions in stocks mentioned.

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