A GREAT ARTICLE ON DELL...
Hi Kemble: This is from Today's LA Times.
<<Tuesday, February 23, 1999
Dell Still Computes
Stock Exchange gives readers a chance to listen in as Times staff writers James Peltz and Michael Hiltzik debate the merits of individual stocks.
Dell Computer (DELL)
Jim: If you're looking for one of the most popular, widely traded stocks on the Nasdaq market, you can't do much better than Dell Computer, right, partner?
Mike: Yes, although to hear all the commentary about Dell lately, you'd think the party's over.
Jim: Not true, but we'll get to that in a moment. Dell, of course, is the incredibly fast-growing maker of personal computers that was started by one Michael Dell out of his college dorm room. Said to be a born entrepreneur, Dell pioneered selling PCs to businesses directly--that is, over the phone or the Internet and without stores. It was a masterstroke. I use a Dell here at The Times, by the way, and I have no complaints.
Mike: Neither do I, and I not only have a Dell here, but also at home.
Jim: Dell Computer struck gold because it found a very efficient, low-cost way of moving PCs from its plants to the customer. At the same time, Dell stayed extremely focused on customer satisfaction, almost to the point of obsession.
Mike: Which is evident by Dell's numbers.
Jim: They're mind-numbing. Consider this: In 1996, just two years ago really, Dell's sales were $7.7 billion. In '98, they were $18 billion.
Mike: But there's another Dell number, Jim, that's one of the most striking numbers I've seen as long as I've been covering business. You know which one I'm talking about, don't you?
Jim: Yeah, the stock price.
Mike: Since early 1990, nine years ago, this stock has appreciated 76,000%.
Adjusted for splits along the way, it went from 13 cents a share to more than $100 as of early this year. And it just announced its seventh split in seven years. Which tells you why Michael Dell's net worth is around $20 billion.
Jim: But the stock's dropped more than 20% lately, which brings us back to your comment about the party being over.
Mike: The stock is dropping because a lot of people are suddenly worried that Dell's growth is slowing.
Jim: Which is nonsense. Even if Dell's growth rate has slowed a tad from its historical rate of some 50% or so, it's still an exceptionally fast-growing machine, and its stock is still very attractive.
Mike: I agree. The growth has not ended for Dell and, even if it slows, investors have so much confidence in Dell's management team--and it's well-placed confidence--that they'll continue to bid high for Dell's growth. This company's performance has always been consistent and almost always outperforms people's expectations.
Jim: The stock got as high as $110 a share on Feb. 1 and has since dropped to the mid-80s, meaning it still sells for about 55 times its expected '99 earnings per share.
Mike: That's about right for a reliable, fast-growing, high-tech outfit like Dell.
Jim: Yep. Now, it's true that Dell faces growing competition, and that's why I'm not surprised if its growth has slowed a bit. Compaq Computer, among others, is moving aggressively into the direct-selling business. Dell, in turn, is moving more into the consumer and home-office markets to maintain its growth, and those are markets where Compaq, Hewlett-Packard and others are already knocking heads.
Mike: Right. Dell traditionally has focused on selling to businesses, so it hasn't loaded its computers with a lot of video game software. But the consumer and home-office markets hold a lot of potential for Dell.
Jim: Here's what you do: Ignore all the noise about a possible slowdown at Dell and just buy this stock. This is a great company that builds a fine product that's continually in greater demand. Sure, this stock might not keep skyrocketing as it has throughout the '90s, but so what? It's still going to provide big profits.
Mike: Because the company will keep growing.
Jim: There's no end in sight. Listen, just the other day the research firm Dataquest published its worldwide data on PC shipments. Guess who had the biggest percentage gain last year? Dell, at 65%. That's more than twice the gain of the nearest rival.
Mike: I'm with you. You know, people have made emotional darlings out of some of the most preposterously ludicrous companies in the high-tech sector. So you can do a lot worse than getting emotionally involved with a company like Dell. >>
Hmmm.......Somebody out there in the press really gets it...!!!
DELL is the next DELL.
Regards,
Scott |
