Street Fight - The Guys vs. Greenberg


In Round 1 of tonight's Street Fight, Herb is lashing out at Tim for bullish comments he made a month ago on Sandisk (SNDK). Herb says Sandisk’s gross margins have fallen to their lowest levels in nearly a decade. They’re making less money on everything they sell. Real chip supply is outstripping demand – people are buying televisions for less money and since manufacturers are charging a lot less, they want suppliers to charge them a lot less. That puts pressure on chipmakers like Sandisk, and Herb doesn’t see how Tim could back that kind of stock.

Tim doesn’t think it’s an inventory issue, though. He thinks SNDK could have their worst earnings ever with flash memory prices so low, but there’s going to be a turnaround. It will remains a good buy and he sees it going even higher.

That’s a head fake, Herb says. “These stocks are taking a dip, just watch.”

Dylan is giving the first round to Tim. We’ll see if his predictions come true.

Herb needs to redeem himself after that beating, so he’s going after Guy for positive comments he made about Dell (DELL) last month, comparing it to Hewlett-Packard (HPQ). Dell is a huge company, and it’s hard to get organic growth from it, Herb says. On top of that, Dell’s got these accounting issues and you can’t just brush those off because it’s unclear how serious they are. Herb says Dell is a company that has never been quite as profitable as we were led to believe, and a comparison to HPQ just doesn’t make sense. If it wants to grow, Dell needs to acquire a company, but who would that even be? Palm?! All that and credibility issues with the public, Herb can’t believe Guy is bullish on a company with so much bad news following it around.

The accounting issues could very well just be a distraction, Guy says. He grants Herb the fact that the company has had paltry revenues over the last couple of years, and its operating expenses are up 30% over the same time because the company’s head count is up 50%, he says. He’s standing by his comparison to Hewlett-Packard, a company that cut expenses and raises revenues. Guy thinks the same thing could happen at Dell.

In a close call, it comes down to the numbers. Dell stock is up, if only a little, and the Commissioner gives Round 2 to Guy.

Herb is down two rounds to none. It could get ugly if he gets shut out tonight, so he’s pulling out all the stops in the final round. First, he wants to go after Eric Bolling on RIMM but Eric isn’t there today. Herb thinks it’s because he’s too afraid to face him, so he’s calling out Jeff on comments he made a couple weeks ago on Citigroup (C).

Jeff had said that he didn’t think any Citigroup layoffs would amount to anything for the stock. Even after the company announced it would cut about 15,000 jobs, Jeff says that until Citi’s management has an actual plan to fundamentally improve the bank, anything else they do is meaningless. But Herb says the layoffs that were announced yesterday – which amount to 5% of the company’s workforce - show that investors want something to happen at the bank, and there’s enough pressure to make it happen. He thinks Citi is a great deal in the long-term.

He isn’t going home empty handed, after all. Dylan declared Herb the winner in the final round. Job cuts on Wall Street have historically worked exceptionally well, Dylan says, so Herb gets the edge on this one.


Questions? Comments?

Trader disclosure:
On APR 12 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders:
Strazzini Owns (SNDK), (NWS.A)
Macke Owns (SWY)
Najarian Owns (ARO), (AMLN), (BRCM), (CAT), (COST), (KSS), (MEDI), (PENN), (AAPL), (TLM), (EDS), (BSX)
For the record:
Strazzini Owned (SNDK), (BRCM) On 3/9/07