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Technology Stocks : Dell Technologies Inc.
DELL 120.24-0.2%1:40 PM EST
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To: Mohan Marette who wrote (80217)11/14/1998 11:05:00 AM
From: Richard Tsang  Read Replies (2) of 176387
 
Mohan:

Thanks for the additional insights. You said:

"If I am not mistaken this has been the case with DELL in most
quarters and don't know why you will take this as a negative. I
don't know about you but I rather see DELL grow their earnings
faster than the revenue,I would be a bit concerned if the the
opposite were to occur."

That is exactly where my concerns are. They have been doing big buy-backs in the past to boost EPS, creating a premium growth rate that is better than true growth in net income, which is just in line with sales growth. Now if the buy-back effect is taken out, you have more shares as the divisor of EPS and that premium growth rate will narrow or disappear. What will the analyst and us all think if that happens? It has not happened yet, and probably will never happen, but a concern. Dell has plenty of cash and continues to generate cash so hopefully that will not be a problem.

On the A/R issue, I have seen companies trying to book "marginal" type of transactions on the last few days of the quarter to make up the needed sales and profits at the expense of the next Q. This mostly can be seen in a sudden drop in inventory as well. Since the inventory did not increase along with the rate of business growth, I would have to assume either they did an extraordinary job in further improving their inventory management by 10% or stole some sales from the next quarter. I understand that Dell has a track record in managing inventory and to get a 10% improvement on that kind of record in one Q doesn't seem quite possible - that's why I am concerned.

RT
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