John, Re: silly .01
If Dell were an income stock, then I would agree with you that a $.01 difference in EPS, more or less, should make little difference in the value of the stock. (I gather that was your point). For a growth stock like Dell though, coming up short by a even a penny can make quite a difference in its implied valuation. Dell's EPS in 4Q 1999 was $.16. Consequently, its EPS growth rate for 4Q2000/4Q1999 would be 25%, 31.25% or 37.5% depending upon whether it were to report $.20, $.21, or $.22. These are not insignificant differences in growth, they are major.
The usual models in finance assume that the value of a stock equals the sum of the present discounted value of the firm's projected future cash flows. If these cash receipts are growing rapidly, then the stock's valuation is highly sensitive to the assumed growth rate. (this is because of the exponential nature of the growth). Small variations in assumed growth can make for very large differences in earnings down the road.
If Dell comes in at $.20 EPS, which would represent a growth rate of only 25%, IMO that could very well prove vindication for Niles' when he predicted an "horrific" quarter.
Just my opinion.
Geoff
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