D,
Undervalued? I don't see things as being so rosy at all. Everyone is forgetting one basic fact - box makers are box makers. They make a commodity product. It is becoming more of a commodity product with the sub 1k pc(price is the overweighting factor). Look at GM, C, F. What kind of PE are these guys at(7, 10, 7). Cars are higher priced, more sophisticated machines. People's lives depend on cars, not on most PC's. Reliability is important, but CPQ, IBM, HP, many-many others make OK PCs too(maybe better).
Dell has a proprietary distribution and service model as does Walmart and therefore captures a higher PE. This is what makes Dell unique. GTW has nothing special. They're a runner-up like Sear, K-mart.
As far as market conditions go, PC prices are declining and it is the >beginning<. The trend in avg selling price is down and few would argue against it continuing. As the old B-school case study goes declining prices and being in a commodity business is a prescription for disaster. GTW will have more probs, soon. Moving to California is an attempt to stem the flow. Going "retail" is a joke and isn't likely to succeed. Smart guys at Dell bailed after they realized that it was a loser.
Lastly, market is full of froth. S&P addition is just making the elastic stretch further. Dell ran on S&P addition because it was Dell, not just because of addition to S&P. GTW fundamentals haven't changed one bit. These zealous/careless attitudes to high PE's on commodity companies will net some result.
Hmmm. As you can see, I think that GTW is way overvalued. Now, let's see. -N |
