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Technology Stocks : Dell Technologies Inc.

DELL 122.46

-8.5%

3:59 PM EST

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To: Lee who wrote (145354)	10/20/1999 2:45:00 PM
From: Gabriel008	Read Replies (1) of 176387

Lee, the analysts have interpreted this short-term margin pressure as impacting the EPS [although DELL didn't in fact state they wouldn't make their quarter]. Consequently, the major brokerages have downgraded DELL and/or reduced DELL's Q3 earnings to the 17 -18 cent range. However, it is entirely possible that if DELL misses it may not be by much. Here's why. Q3 sales are heavily backloaded [roughly 30% to 35% in the last 3 weeks]and this is where the incremental [read unbudgeted] $70 to $75 in DRam costs per unit will be incurred.They could do some very creative things in this time frame such as switching customers to different configurations and/or actually passing on the DRam cost increases. Although my business model recalculates DELL's Q3 at 18 cents, based on 20.0% GP [versus 22.0% in Q2] I believe that DELL has the means to achieve 19 cents and maybe even 20 cents if they can achieve a minimum 15% sequential unit growth, maintain ASPs at parity with Q2 and somehow maintain GP's in the 21% area.They may not be able to do all three but some combination of the three might permit DELL to surprise the market on earnings day.

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