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Stock Analyst Update

Week in Stocks: A Blue-Chip Tech Bargain Shows Progress

Plus, private equity giants go wild, Medtronic posts a strong quarter, and more.

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Dell's (DELL)  preliminary  third-quarter earnings significantly exceeded Wall Street's expectations. As Morningstar analyst Mark Lanyon had  earlier predicted, sales growth was again tepid, advancing only 3.4% from a year ago, though operating margins widened by 150 basis points. In Lanyon's opinion, this showing reflects Dell's calculated retreat from certain PC segments in favor of various higher-margin offerings that are emerging. Thus, while this shift damped growth, it drove improved operating profitability. More generally, Lanyon thinks that Dell is in the midst of an evolution away from a PC-centric business model toward a more balanced set of hardware, software, and service offerings to corporate customers. This, he believes, should allow Dell to move past its recent fundamental challenges (such as flagging customer service and reliance on the mature North American PC market) and confer more-respectable growth and operating profit performance than the company's current share price reflects. As such, Lanyon is maintaining his fair value estimate.
 Full Analyst Report: Dell

Blackstone Pays Through the Nose for Equity Office Properties Trust
On Monday, private-equity giant The Blackstone Group announced that it intends to purchase office property REIT Equity Office Properties Trust (EOP) for $48.50 per share in cash in what would be the largest take-private deal ever. The offer represents an 8.5% premium to the stock's Friday closing price and an even-steeper premium to Morningstar analyst Arthur Oduma's fair value estimate. Oduma thinks investors should take the money and run. Equity Office is the third public office real estate investment trust that Blackstone has bought in the recent past, the other two being Trizec and CarrAmerica. Given the size of the deal, which approximates $36 billion, Oduma doubts there will be many rival offers and, thus, expects the transaction to close as scheduled in early January 2007.
 Full Analyst Report: Equity Office Properties Trust

Jeffrey Ptak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.