Joel,
If a price of 38 in your mind translates to a growth rate of 11%, please explain how you arrived at the 11% growth rate and how that squares with management's contention that they will get to 50 billion in revenues by Y2K... As TechM's post says, CPQ has been growing at a minimum of 4 times that rate. Are you forecasting a complete slowdown shortly? If so, why? The PC industry is still much more fragmented than microprocessors for instance. I think the numbers I saw recently showed that CPQ had a 19% share (but I don't remember if that was worldwide or US only) and that Dell was around half that. Assuming that these two pull away from the rest of the pack, that sounds like quite a bit of room to grow. Your argument is the same one that has been made for years. Look at component price drops and manufacturing/inventory efficiencies. Did you see Kai-Uwe's posting recently that says CPQ is making 15-20% even on the sub 1K pc? How do you explain expanding margins with all the price cutting going on? (Margins were UP in the latest quarterly report).
John
Yes all that cash is not generating the best returns, I'm sure management will put it to work in a timely manner. But the point is, you don't get 6 billion in the till without generating some nice profits, do you? Finally, even Intel, which has almost 90% of the microprocessor market, is growing faster (and is projected to continue to do so) than your forecast for CPQ. Comments? |
