James, PE will no doubt contract, expand, contract, expand over
time as a result of many variables. Your assertion that Dell cannot
maintain it's momentum due to the fact PC's are a commodity is
IMO incorrect. PC's are not a commodity. Period. No way, No how,
not today, not even close. Tomorrow, someday, yes. Any product
that's continually being redefined every six months is not a
commodity. Any product that becomes obsolete every 2-3 years
does not classify as a commodity. A toaster is a commodity.
PC's 5 years from now will hardly resemble today's machines
in terms of speed, power, capabilities and asthetics.
Today, Dell is at a $13B annual run rate. In 5 years, it will be at $50B. You are wise not to doubt the future of Dell. It would also be wise not to go short unless you are a perfect market timer.
Expect Dell to grow revenues and earnings by AT LEAST 35% year
over year for the next five years. I guess technically, that
classifies as a slowing of momentum by recent Dell standards.
My arguments have never really focused on valuations but rather
on the issues of future growth, opportunity, technological change,
the "PC's are a commodity" myth and the "no barriers to entry"
fallacy. The PC universe will expand to collosal proportions
and todays leaders will continue to dominate and steal market
share into the future. Dell is in this catagory.
Are Intel's monopolistic days over? That's a different discussion
and argument. The Intel thred micro analyzes that topic minute by
minute, bit by bit and it would be a waste to discuss here.
I will say that I study this very topic daily and all signs point
to continued domination. Intel is the only reliable volume supplier. While AMD and Cyrix make fine and capable trailing edge processors, it's as much about business, strategy and war as it is about technology. Witness Apple, PowerPC, BetaMax etc.
Whether or not Dell can maintain it's high PE is anybody's guess.
Paul Levy has stated emphaticaly many times that it's impossible
to accurately value these stocks and I tend to agree. One thing
is certain in my mind however, Dell's stock will continue to go
up more often than it will go down for the forseeable future.
MEATHEAD |
