Frank, After fending off several hundred insults, my argument against Dell stock has kinda gotten lost. <G> Here it is in a nutshell:
1. Price, price, price. There is no way Dell can be considered anything but grossly overpriced in any reasonable pricing model. I know, that is nothing new, but it is still the main point and most important point of any Dell bear's argument.
2. The PC market had negative growth for the first time ever in 1998. This is a totally different operating environment that the pc cos. have had to deal with in the past.
3. This year will be worse for the industry. I know, Mike Dell is calling for sales up 17% industry wide. Same as he was calling for last year. A great CEO he may be, but a Kreskin he isn't. <G>
4. Dell is in the wrong part of the business. The corporate side is now a hurting puppy, which we have seen with the channel in deep kimshee and Y2K arriving and S&P 500 eps hardly growing at all. It is a lousy environment for Dell's main business. Last year, pc unit sales (not revenues) grew 12%. Consumer unit sales grew about 16%. Obviously, business pc sales growth, even in units, is in a swoon.
5. Avg. sales prices for the industry are falling faster than units are growing. Again, this year.
6. Dell had the hihest number of insider sales ever late last year. I don't give this a lot of weight, but I think it should be noted.
7. Dell is highly leveraged with its stock buybacks, put warrants, option plans, etc. These things only work in a market where the stock goes up.
8. Components, whose prices have been in freefall, are now falling much more slowly. Still room for the best cos to dance around, but no longer all the room in the world.
9. Dell missed the sub $1000 pc and now has to come in with competition established. Strategic error.
On the positive side, Dell makes an excellent box. Maybe the best in the business. Dell recovered in 1991, the last time they fell on their face. The stock has made the index brain dead buy list. The co. has superb accounting and investor relations hype.
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