Murray, I am, of course, not a terminal bear, as I realize as I count up my recent long profits on Commscope and Ligand and Cell Genysis. However, I realize that Dellnialists only consider one name important, so here goes <g>:
1. First and foremost, I've made a large, though not by any means overwhelming, amount of money buying puts on Dell for the past year, so I am obviously not the only one who sees this dog in decline. It IS in decline, even by their unholy standard, which is stock price.
2. Using my standards, the price I would pay to buy an ongoing business, Dell is way overpriced. Its sales growth is declining, its earnings growth rate is declining and its PE ratio is still sky high, even after the stock has declined.
3. The business sucks. PCs are becoming more and more of a commodity and this has even impacted Dell sales and profits.
4. The direct model scam may have shot its wad. With some components actually rising in price, Dell's silly direct model is very likely to hurt them more than it helps them if this environment holds. In all honesty, I think the component thing is short-lived and this is only going to impact them temporarily.
5. Businesses have overbought PCs in anticipation of Y2K. As it arrives, they are going to be fairly fully stocked with boxes and Dell will suffer from lower business demand growth. In fact, that has already happened, which is why Dell had to flim-flam their receivables last quarter. BTW, they did the same receivables game in the same quarter last year, and the next quarter was the one that caused the decline from $55 to $31.
6. And, first and foremost, even if you believe the story hook, line and sinker, you are paying not only for certainty, but for fantasy.
Hope this helps. |
