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As a bit of a change of course, why don't we take a closer look at a recent pronouncement by MD, which, in my mind, has more validity and substance than would any particular announcement about Dell entering a specific software/hardware/services area in a big way..
(I won't copy the articles but I'm sure you saw on Fri./Sat. where) MD said that the overall (addressable) market for hardware/software/services in 5 yrs. will be around 450 Billion Dollars, and that Dell could capture 20%, or 90 Billion of that..
With my back of the envelope calculations, I get the following:
-If Dell has revs. of 90 B in 5 yrs= Approx. 37% y-o-y compounded rev. growth ('00-'04)...if MD is starting from end of last fiscal year, 18.2B)
OR
-If Dell has revs. of 90 B in 5 yrs= Approx. 32-33% y-o-y compounded rev. growth ('01-'05)......if MD is starting from end of this fiscal year, '00, at around 25B
Let's say that MD is off, even by a large amount....that Dell will acheive "ONLY" 65B in revs. after the "5 year period"...
In my rough calculations, I get Dell still acheiving somewhere between 23-33% annual revenue growth (depending on where MD's start point is...) for the period(s) in question, either '00-'04, or '01-'05...
NOW..
Even the worst case scenarios don't look too bad, do they?
Combined with Dell's increasing emphasis on higher margin opportunities, I think we can all feel pretty good about the stock for the long-term, or next few years....
Granted, MD is not giving us specific info here, BUT if the analyst/investor community really looks at this, this should make many feel very good about keeping the stock as a core holding...
IMO, the biggest problem Dell faces (has faced) are the unrealistic expectations of the investment community...as Chuzz so aptly puts it, a company growing its earnings at 40% can not see its stock appreciate at 200% very long...IMO, Dell will not grow at anywhere near the rate of the past 2/3 yrs...however....
After, perhaps, a little period longer, I think we will see Dell start appreciating (again) at a rate close to its earnings growth (for the next 5 years), or somewhere in the 30-40% range...admittedly, it is unclear what effect Y2K is going to have on stocks the 2nd half of the year...
However, isn't MD's recent prognostication(s) some cause for optimism here?? |
