Bloomberg News

Dell Falls on Concern Thai Floods May Disrupt Parts Supply

October 20, 2011

(Updates with analyst’s comment in fourth paragraph.)

Oct. 20 (Bloomberg) -- Dell Inc. shares fell the most in two months amid concerns raised by one of its suppliers, Western Digital Corp., that the worst flooding in Thailand in five decades may hamper production for months.

Dell, the third-largest personal-computer maker, dropped 94 cents to $14.96 at 1:11 p.m. in New York. Earlier, the shares slipped as much as 7.6 percent, the biggest intraday drop since Aug. 17. The stock had gained 17 percent this year before today.

Western Digital, which makes disk drives, has shut two factories in Thailand, joining such companies as Honda Motor Co. and Canon Inc. that have closed about 1,000 facilities in the Asian nation ravaged by rising waters. Dell gets more than 50 percent of its sales from personal computers, servers and storage that are based on hard-disk drives, said Brian Marshall, an analyst at ISI Group.

“Fears are starting to intensify as we get more clarity,” Marshall said. He has a neutral rating on Dell shares and said he doesn’t own any. “It could be a multiquarter event.”

On a conference call yesterday, Western Digital Chief Executive Officer John Coyne said it may take several quarters for the Irvine, California-based company to resume normal production. Dell, based in Round Rock, Texas, is one of Western Digital’s biggest customers, according to supply-chain data compiled by Bloomberg.

‘Minimal Impact’

Dell expects “only minimal impact” on its third quarter, which ends Oct. 31, and is working with suppliers to mitigate the affect on the fourth quarter, said David Frink, a spokesman for the company.

Hewlett-Packard Co., the world’s largest maker of personal computers, fell 1.9 percent to $24.50. The Palo Alto, California-based company gets about 44 percent of its sales from devices that feature hard disks, Marshall said.

“This is a significant, multiquarter supply-chain disruption that could have a negative impact to several companies and sectors,” according to a Bloomberg supply-chain analysis. The report cited Hewlett-Packard, Dell, Lenovo Group Ltd., EMC Corp. and Acer Inc., along with their suppliers, as some companies that may be affected.

--With assistance from Ian King in San Francisco. Editors: Jillian Ward, Marcus Chan

To contact the reporter on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net.


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