Duke - frankly, seymour is as usual full of crap. The first "fact" that jumped out and hit me in the head was "Thin servers were the reason, for example, that Sun (SUNW:Nasdaq - news) bought Cobalt, whose Raq line of rack-mountable thin servers was soaring."
Cobalt sold several weak incarnations of dedicated app servers, few of which fit the "thin rack" profile. They were 8th in a field of 8 with dismal sales, half of which were to their corporate investors. They never showed a profit in their entire history and their revenues were a joke.
So then I re-read some of the other statements. CPQ grew margin by nearly 2 points and dropped OPEX by more than a point. A simple spreadsheet shows how performance like that could grow EPS 25% on revenue growth of 9%. But wait, there's more... if the mix continues to shift away from low margin consumer and desktop PCs and more to enterprise products, the EPS goes up even if revenue does not. If 90% of the profit comes from 50% of sales in enterprise, then each enterprise revenue dollar is worth 9 PC revenue dollars in EPS terms. Anyone want to take a swing on how big a shift in the mix it would take to give a 25% EPS gain, even with no efficiency improvements and NO revenue growth? 50/9 or 5.6% for the mathematically challenged. With 9% revenue growth, 4.5% does the trick. I could go on and on, but since I have never seen Seymour write anything I respected, I don't think it's worth my time. |
