To Sig et al:
From DELL's CFO
(UPDATE) Dell Finance Chief Downplays Concerns About Falling PC Prices
Dow Jones Online News, Tuesday, June 02, 1998 at 14:36
NEW YORK -(Dow Jones)- Fast-growing Dell Computer Corp.'s finance
chief, Thomas J. Meredith, Tuesday sought to ease investors' fears about
falling PC prices. "There's nothing to be frightened about," Meredith
said of the drop in Dell's average selling price in the company's
first-quarter results.
Meredith addressed a group at an investors' conference in New York.
Concerns about Dell's slight decrease in PC selling prices and its
valuation have contributed to a decline in its share price since the
first-quarter report was released May 19.
The stock (DELL) closed that day at $94.594, but has since dropped
17% to $78.313 at Monday's close. In afternoon trading, the shares were
up $3.125, or 3.9%, at $81.438 on volume of 16.1 million shares. Average
daily turnover is 16.6 million.
Meredith said the recent price wars between International Business
Machines Corp. (IBM) and Compaq Computer Corp. (CPQ) "eventually" will
work out, resulting in the top five PC makers gaining a larger portion
of the overall consumer market. He noted that right now, the top five PC
vendors control only about half of the total market, but that is
changing.
In his bullish comments, Meredith also seemed to address investor
concerns about Dell's valuation. He noted that Dell has grown by more
than 40% a year for five years and asserted that Dell is trading "at a
discount" to companies with comparable growth, such as retailer Home
Depot Inc. (HD).
Meredith flirted with the idea that Dell will meet analysts'
expectations of hitting $17 billion in revenue this year, up from more
than $12 billion last year. "We'll see how that plays out," Meredith
said.
Also, Meredith said Intel Corp.'s (INTC) decision to delay
introducing its own Merced chip until 2000 could work out to Dell's
advantage.
"For Dell, it's not a significant aspect," he said. "It will give us
a chance to learn about the high end of the market for six months more."
Dell will perhaps address a sub-$1,000 computer when Intel introduces
its second-generation chip for that market, which is code-named
Mendocino.
Dell, based in Round Rock, Texas, is a direct seller of personal
computers noted for efficient production and low prices. The company
again blew by its competitors in the first quarter, continuing the
tremendous sales and profit growth that had pushed its stock to lofty
levels. In revenue, the company passed IBM's PC division to become the
world's second-largest PC seller. Dell's revenue grew 52% to $3.92
billion.
Its top competitors - Compaq, IBM and Hewlett-Packard Co. - are
trying to streamline themselves to match Dell's build-to-order and
direct-selling efficiencies.
But Dell isn't immune from trouble. The company stumbled before,
during a period of hypergrowth in 1993. At that time, sales were more
than doubling but the company botched a move into the retail market, had
troubles overseas and misjudged demand in notebook PCs, which forced it
to leave that business for a year while it redesigned products. It has
fixed those problems and become the industry leader in keeping costs
down.
Separately, the Commerce Department said Dell's German unit will pay
a $3,000 civil penalty for two alleged violations of the White House
provisions that forbid companies from indirectly helping promote certain
boycotts.
The Commerce Department alleged the unit, in a transaction involving
a sale to Saudi Arabia, furnished information regarding its business
dealings with Israel. The department also alleged the company failed to
report its receipt of the request for the information it furnished.
The Commerce Department said Dell voluntarily disclosed the alleged
violations. While neither admitting nor denying the allegations, the
company agreed to pay the penalty.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
Enjoy.
Cricket |
