Reginald, I'm curious as to how you calculated DELL's value. In theory, a DCF approach to valuation is very nice, but the uncertainties are vast, and the misapplication of the technique is a great pitfall. I'm not sure, but I believe your report has a number of flaws including the following:
First, why are you discounting at the cost of capital rather than a risk-adjusted discount rate (and if you can justify the cost of capital how have you calculated it?);
Second, the uncertainties in looking past the next year are huge, so how in the world can you come up with meaningful terminal values?
Third, I don't believe you segregated the cash flow derived from non-operating sources (ie, interest and gains made on short-term investments).
I don't believe it's possible to value a growth company using DCF techniques, but I'm always willing to be convinced. I look forward to your response in detail.
Regards,
Paul |
