Sig, my take on tech is that no tech is buy and hold for too long. I suppose one would be doing okay in Dell only if they bought no later than around 4 years ago. Anything much later than that and you might be down 50%, let alone showing a profit over the past 3 1/2 years. And Dell is one of the stocks that have held up better than most tech because it did not get bid up during the 1999-2000 craze. Hell, if someone had bought the NAS in 1997 and went into a coma over the past 5 years, upon waking they might say 'damn, the market went nowhere'!!! Of course, as we know, fortunes were made and lost... Looks like Kumar is doing the 'position trade' thing also, from the low 20's to the high 20's...
Best regards,
John
TALES OF THE TAPE: Dell Admired By Street But Stk Is Flat
By BOB SECHLER
Of DOW JONES NEWSWIRES
AUSTIN, Texas -- Dell Computer Corp.'s (DELL) unrivaled ability to profit from low-cost computer systems while its competitors flounder has earned it widespread admiration on Wall Street.
But that sentiment hasn't been reflected in one key area - Dell's stock. The shares have spent much of the past 18 months treading water in a range of $20 to $30, and even some analysts with buy ratings on the stock don't see it breaking out anytime soon.
Shares of the Round Rock, Texas, company have been trading around $26 Friday.
"What we're advising clients is to add to positions in the low $20s and lighten up in the high $20s, because we don't see any catalyst beyond that" within the next 12 months, said U.S. Bancorp Piper Jaffray analyst Ashok Kumar, who has the equivalent of a buy on Dell.
To be sure, the predicament is partly the result of Dell's strong showing in a slumping computer market: At about $23, the shares already are richly valued, trading at about 31 times the company's projected annual earnings. Competitor Hewlett-Packard Co. (HPQ), by comparison, has a forward price-to-earnings ratio of about 18.
Dell has wielded its low-overhead, direct-order business model relentlessly amid the ongoing economic malaise, cuttings its own operating costs to less than 10% of revenue, slashing prices to win market share and generally bedeviling more top-heavy competitors.
On the flip side, however, Dell's reputation for high growth has been tarnished as overall spending on technology has slumped and price cuts have taken a toll on margins. Dell's first-quarter earnings of 17 cents a share on about $8 billion in revenue came in flat from a year-ago, even as the company's unit shipments increased 13%.
Meanwhile, it's unclear whether the company can offset the impact of slowing industrywide growth for its core desktop market - which accounted for 54% of its first-quarter revenue - by finding enough new markets in which to successfully deploy its vaunted manufacturing and distribution efficiencies. Dell's traditional strength is in assembling off-the-shelf components to customer order, rather than in innovating new systems.
"The question is, how much do you want to pay for a company that's clearly the best at what it does but that's in an industry in which, clearly, growth is slowing?" said Lehman Brothers Inc. analyst Dan Niles, who has the equivalent of a hold rating on the stock.
Catching Rivals' Attention
Few expect Dell's shares to crack their $30.52 high (reached Jan. 9) in the near term, let alone approach their $50 heights of mid-2000, unless the company finds a way to re-ignite growth.
Chief Executive Michael Dell declined to say much about the stock in a recent interview with Dow Jones Newswires, but he scoffed at that notion that his company's prospects may have dimmed.
"When I look around the industry, I see turmoil and, for us, opportunity," he said in characteristically upbeat fashion. "We're more challenged by the order in which we go after them," than by a lack of markets to target.
The company has been focusing intensely on its strategy to sell bigger and higher-profit computer systems, such as servers and storage devices, to businesses and other enterprises. CEO Dell said the effort is going well, although he acknowledged that continued inroads in those markets is "obviously critical for us" long term.
Indeed, Dell's server business has logged strong gains in terms of units shipped, according to research firm Gartner Dataquest, with the company finishing the first quarter as the No. 2 vendor worldwide based on volume and increasing its market share to 17.5% from 15.7% a year ago.
But Dell remains a much smaller player in terms of server revenue, coming in at No. 5 with a 6.9% market share, according to Gartner, flat from a year ago. The numbers are indicative of Dell's status as primarily a low-end server player, an area where margins are smallest and pricing pressure is most intense, a fact some competitors are quick to point out.
"Dell is essentially locked out from competing at the high end of the server market" because of its relative lack of support services and its reliance on components designed by others, said James Gargan, a vice president at International Business Machines Corp. (IBM), which is first by server revenue.
Still, Dell's server momentum clearly has caught the attention of its bigger-name rival. In an example of unintended flattery, IBM recently issued a press release that, among other things, compared the price of one of its new low-end servers to that charged by Dell.
"We were proving yet again that we can compete on price with Dell," Gargan told Dow Jones.
Further Acquisitions Likely To Be Small
Dell has had more difficulty gaining traction in the market for storage devices, which has standardized relatively slowly and frustrated the company's effort to find a low-end entry point.
But the company managed to create a positive buzz in October when it announced a partnership with industry leader EMC Corp. (EMC), under which it will resell a low-end EMC storage product. EMC officials announced this month that Dell will manufacture one of its low-end storage products as well in an expansion of the agreement.
Dell has also moved to beef up its support offerings as it attempts to polish its credentials as a player in the higher-end corporate business market. To that end it recently acquired closely-held professional services company Plural Inc. Terms of the deal weren't disclosed.
Additional acquisitions are a possibility, CEO Dell said, although they are likely to be small.
"We've underlined the word 'small,"' Dell said. "What we have said is we have these kinds of new areas of our business, and these are areas where you're likely to see partnerships, alliances and, yes, small acquisitions."
The company hasn't been standing still in other markets, either. It began selling low-end networking equipment last year, and it also has been publicly discussing the prospect of selling Dell-branded printers and ink cartridges. Recent industry rumors have the company eyeing the handheld computer market as well, although Dell officials have declined to comment.
Overall, CEO Dell maintains that the direction of technological innovation favors his company's business model, with high-end proprietary systems invariably giving way to lower-cost alternatives built with standardized components. As that happens in any market, he thinks few competitors can outperform Dell.
"It's always the same," he said. "The question is when (markets) move to standards, not if they move to standards."
Meanwhile, the company also contends that its big volume market gains for products such as desktops and servers will lead to increased revenue when technology spending rebounds overall.
Analysts don't necessarily disagree. But many say the question for investors is how much to pay for Dell shares in the interim.
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