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Technology Stocks : Dell Technologies Inc.

DELL 139.14

-0.9%

10:57 AM EST

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To: Henry W Singor who wrote (92668)	1/29/1999 5:39:00 PM
From: Chuzzlewit	Read Replies (2) of 176387

Henry, you noted: That means that the fact or thought that Dell will surpass Compaq in market share is already factored into the price of this thing. And your point is ...? Some time ago a number of us on this thread pointed out the extreme difficulty CPQ would have in untangling itself from the tendrils of the channels it uses to distribute merchandise. You are only seeing the beginning of that problem. It will be much worse as time goes by. A second point. Valuations inevitably depend on free cash flow and the perceived growth in cash flow. Not Sales or a multiple of sales. What you may not have noticed is that the ROIC of DELL is an order of magnitude higher than IBM's. That's because the cash requirements for Dell to expand are so small compared to its competitors, and that's the reason that the market has awarded DELL such a huge premium. This tends to be a difficult concept for people who simply look at earnings reports, but it is the key to understanding Dell. I don't know whether Dell's absolute valuation makes sense, but its relative valuation sure does! TTFN, CTC

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