I am new to this thread, and there is something very basic that I don't get about
intel's current valuation:
Intel now has a P/E ratio of about 21. CPQ has about 30. DELL has about 45.
Given the following:
1. Intel has 85% market share.
2. CPQ and DELL each have less than 15% market share.
3. CPQ and DELL have at least 5 other first tier competitors who are likely to
keep, give or take, their existing market share.
4. Both CPQ, DELL and other first and even second-tier manufacturers use 95%
Intel chips.
5. Even if Dell grows by 30% a year in the next couple of years, and Intel only by
20%, wouldn't a company that's set to gain from both DELL's increased sales, as
well as DELL's competitors' sales (that company being Intel), likely to grow at a
higher rate, given enough years, than any one of these computer companies, if 85%
of computers still use Intel chips?
6. Consequently, why is Intel valued at only 20 times earnings, while CPQ and
DELL 30 and 45, respectively?
Skye,
One reason is that Dell and Compaq can grow faster than Intel by picking up the market share of their competitors. They are also both working at increasing earnings by lowering their costs (including inventory carrying costs).
I would, of course, welcome a PE of 30, but this is one of the reasons for the diffential with CPQ and DELL.
Larry |
