Why should I buy or sell Dell?
It looks like Dell's high evaluation has made the market nervous (again). But ,when you change the way corporate America does business, in way Dell has, that understandable. Here is my take on Dell:
Upside:
(1) Dell has the best managed and most highly focused PC company in the business. I have worked as a supplier (not today) and have interviewed with Dell, and without question, Dell knows its market, suppliers and business model and will do what ever it takes to dominate their segment. The Dell purchasing power is legendary, getting the best technology at the fairest price. Contrast this to HP, IBM and Compaq which are in many other businesses aside from server, workstation, desktop and storage. They don't have focus and will not win.
(2) Dell has entered storage to dominate that segment. Wall Street has not figured this out yet. Dell is using their direct model to change the way ISPs and IT vendors purchase and support their explosive data storage requirements. By putting into place strategic relationships with companies such as Veritas Software (the leader in storage management software), Clariion (awesome RAID technology), Adaptec and many other leaders in the industry, Dell is streamlining the IT procurement processes in a business that has MUCH HIGH GROSS MARGINS than the desktop. Their direct model will have a positive impact on the bottom line. A minor shortfall in revenues on the desktop does not worry me. When Dell's succuss in storage becomes apparent to the rest of the world, that will carry the company to new highs.
There is potential downside:
The stock has had a great run up and historically in march the high tech stocks take a breather. However, I believe that Dell's storage and server strategy will pay off in spades. After reading the press release from Stephens, its clear that there is concern with competitive pressures. However, they don't get the big picture. But after dealing with Dell for years, I believe that Dell will remain light years ahead of the competition |
