Einhorn Battered in Dell (DELL) and Best Buy (BBY), Exits With Losses
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Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 2.2%
Revenue Growth %: +2.1%
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In his second quarter letter to investors, Greenlight Capital's David Einhorn said the fund has closed out bets in Dell (Nasdaq: DELL) and Best Buy (NYSE: BBY) - for a loss.
On Dell, Einhorn called it a "disappointment." Einhorn said the non-PC buisness growth was not enough and the PC business deterioration was worse than expected. "While DELL has a good balance sheet, it appears likely that management will try to use much of the cash to try to buy its way into better bushiness," Einhorn comments. "At minimum, this will erode some of the value cushion that the cash balance creates."
On Best Buy, he called it "particularly irksome." Einhorn notes that while they thought the debate was about the company's ability to compete with Amazon, other unexpected problems emerged. First, the company spent $1.3B in cash by paying a double-digit multiple for Carphone Warehouse's share of Best Buy Mobile. Second, the company's international profits collapsed with China comps falling 28 percent. Finally, the CEO was dismissed over personal conduct and the the Chairman was removed for failing to respond to the CEO's behavior properly. The company now has an interim CEO and is trying to come up with a strategy. "We worried that this could lead to additional business disruption so we excited with a loss."
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On Dell, Einhorn called it a "disappointment." Einhorn said the non-PC buisness growth was not enough and the PC business deterioration was worse than expected. "While DELL has a good balance sheet, it appears likely that management will try to use much of the cash to try to buy its way into better bushiness," Einhorn comments. "At minimum, this will erode some of the value cushion that the cash balance creates."
On Best Buy, he called it "particularly irksome." Einhorn notes that while they thought the debate was about the company's ability to compete with Amazon, other unexpected problems emerged. First, the company spent $1.3B in cash by paying a double-digit multiple for Carphone Warehouse's share of Best Buy Mobile. Second, the company's international profits collapsed with China comps falling 28 percent. Finally, the CEO was dismissed over personal conduct and the the Chairman was removed for failing to respond to the CEO's behavior properly. The company now has an interim CEO and is trying to come up with a strategy. "We worried that this could lead to additional business disruption so we excited with a loss."
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