Hi Gary,
I analyzed a lot of the issues surrounding valuation of Dell over the past year and a half, so I won't repeat them all here. Just let me point out that valuation of any company is pretty dicey. I also posted the observation that Dell was pretty expensive when it was trading at over $100. Now this is not a point I can justify with precision -- I can't tell you what Dell ought to be valued at.
But what I can tell you is that Dell's business model is intact, and there seems to be no reason to dump Dell even if Niles is correct. My reasoning is as follows:
First, the market periodically undergoes periods of mass hysteria like when the pied pipers told us that AMZN with negative cash flow is worth $150-$200 per share and the voles all had to buy because the guy told them to. So even if Dell was "overpriced" there are enough crazies in the market to keep the price up. [I, prudent pussycat that I am, sold DELL calls which have all been repurchased, but I digress.]
Second, what Niles is warning of is not a long-term fundamental phenomenon. In fact, even if it were true, it might be over right now or tomorrow. He was telling us of increased price competition in the business market that erupted at the end of January. What effect will that have a year from now? Will anybody even remember? Put another way, his projected $300MM decrease in revenues does not represent a slackening of demand or a rejection of Dell's machines. Most likely, it represents (if true) a manifestation fo the fear that that some of Dell's competitors have of losing their already rapidly diminishing market share.
So my bottom line is this: I am continuing to hold Dell for the long term.
TTFN,
CTC |
