Why Chanos Is A Bear On The PC Sector: 3 Past Leaders To Watch
Chanos lists his top-5 favorite bubbles. Worth noting was Enron, which marked the end of the dotcom bubble. This ended the speculation of the 1980’s and 1990’s, an era which has yet to come back.
List of top-5 bubbles begins around the 23:18 mark:
Based on commentary from Chanos, investors might want to decide if the PC sector really is on a permanent decline, or if companies will restructure successfully:
1. Hewlett-Packard Company (HPQ): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $33.61B, most recent closing price at $17.25.
Bloomberg BusinessWeek covered the decline in HP’s management in a recent publication. Chanos did not think cutting costs would reverse HP’s fortunes.
HP’s timeline for restructuring is at least 5-years. It is not impossible for the company to improve sales in the interim: improving quality and design for printers, notebooks, and ultrabooks would be a start.
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2. Dell Inc. (DELL): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $22.79B, most recent closing price at $13.12.
Shares are up nearly 30% in the quarter, after it was circulated that the company wants to privatize.
Dell struggled to improve profit margins in selling computers. The company expanded its online offering by selling peripherals, printers, cameras, and other electronics. The diversification failed to improve computer sales. Dell does not have a growth strategy in the corporate space.
3. AOL, Inc. (AOL): Operates as a Web services company that offers a suite of brands and offerings for the worldwide audience. Market cap at $2.51B, most recent closing price at $29.93.
AOL management maintained a shareholder-friendly position in maximizing value. The company monetized its patent portfolio, sending shares up by 130% from its 52-week low.
In the retail space, a showdown between online and traditional retailers will play out. The company to watch is: