Mohan: I have given the Street.com 2 chances. With two trial subscriptions I have NOT been satisfied. The bottom line is they will not get my business. Yet, I continue to get updates from them. Here is their latest hot air on the DELL / IBM deal. They seem to think that Mr. Niles is "the authority." Hmmm.....Why not get a little input from CS First Boston or S & P -- firms that have a better understanding of DELL and its potential....
Here is the article:
<<IBM-Dell Deal Leaves Some Scratching Their Head
By Eric Moskowitz
Senior Writer
Maybe there's something Dell (DELL:Nasdaq) isn't telling the Street.
Now that the dust has settled on Thursday morning's announcement that Dell
will buy $16 billion worth of IBM's (IBM:NYSE) disk drives, storage devices
and memory chips over the next seven years, it seems Dell is getting a lot
less out of the deal than IBM. While IBM is locking in one of its best
customers to a long-term procurement deal, Dell is getting access to IBM's
current and future technology. But that doesn't mean Dell will have the
exclusive use of new technologies such as IBM's copper chips. So why the
alliance?
Well, for one thing, speculation has it that Dell could expand this deal
into a comprehensive services partnership with IBM, which has established
itself as a global services leader over the last few years. Such a deal
could be a real positive: for IBM. Services -- including consulting,
support and sales to customers -- have allowed IBM to step out of its
stodgy past and become a player in this new information age.
In addition, a services partnership with IBM runs counter to Dell's desire
to boost its own services business. Dell CEO Michael Dell said at Goldman
Sachs' technology conference last month that services could offer it a way
to stack up more favorably against rival Compaq (CPQ:NYSE).
James Vanderslice, vice president of IBM's technology group, went out of
his way at this morning's press conference in New York to stress that the
deal "has nothing to do with services."
---------------------------------------------
"Frankly, I see what IBM is getting, but I don't see what Dell is getting
out of the deal," says BancBoston Robertson Stephens' Dan Niles.
---------------------------------------------
"A big services contract would be of great benefit to IBM, while Dell
already outsources its services business to many other companies," says Dan
Niles, a BancBoston Robertson Stephens analyst who rates Dell a market
perform. (His firm has done no recent Dell underwriting.)
Dell -- since it opted out of its Digital services agreement last year when
Compaq bought DEC -- set up a number of services contracts with Unisys
(UIS:NYSE), Wang (WANG:Nasdaq) and NCR (NCR:NYSE), says Jerele Neeld,
Dell's enterprise systems group director of communications.
So what exactly does the deal do for Dell?
"Frankly, I see what IBM is getting, but I don't see what Dell is getting
out of the deal," says Niles, who recently (and correctly) predicted Dell
would not meet analysts' revenue growth estimates for its last quarter.
"They were kind of getting these products from IBM already."
Vanderslice says IBM's original equipment manufacturer business -- the
division involved in the deal -- had $6.6 billion in revenues in 1998, out
of total revenues of $81.7 billion.
Dell says there will be a "significant increase in the amount of products
Dell buys from IBM," according to Libba Lenton, a Dell spokeswoman. Lenton
wouldn't say how much Dell currently buys from IBM, but Soundview Financial
analyst Mark Specker estimates Dell will double its purchases -- to about
$2 billion a year from $1 billion -- as a result of Thursday's agreement.
But again, that's to IBM's advantage.
The heavily hyped "alliance" may in fact be a way for Dell to recoup some
of the standing it lost in its last quarter, when it disappointed Wall
Street for the first time in years. But while IBM's stock soared Thursday
as much as 10 points higher -- it closed at 170 11/16, up 3 15/16 -- Dell's
stock popped up a relatively modest 3 points and closed up just 15/16 at 81
7/8.
Niles thinks the direct PC seller is searching for ways to boost revenues,
and a future technology breakthrough from IBM of which Dell could take
advantage could be just the ticket. Just this week, Dell announced it was
launching gigabuys.com, an online computer accessories store that will
presumably add revenues to the company's bottom line. But since it will
sell accessories, "the margins Dell has come to expect won't be there," he
says.
Of course, Niles is not high on Dell's prospects now -- "I'm negative on
Dell, so from my perspective I'm pleased with the deal" -- but others on
Wall Street are agreeing with his way of thinking on what IBM's Vanderslice
called an "alliance that is much more than a procurement contract."
"It's very intriguing, but there has got to be a lot left unsaid here,"
says Joel Gechter, a hardware analyst at the money management firm Northern Trust, which has stakes in both companies. "There's got to be something else brewing."
And that's just it: If there is more coming, the partnership makes a lot of
sense for both parties. But if this is it, IBM has pulled off one sweet
deal.>>
***I'm not scratching my head. I see alot of synergies between DELL And IBM. This is a win-win deal and it could pay off in a BIG way for both companies. DELL chooses its partners carefully. IMO, the Street.com does not choose its contributors very carefully at all....They consistently demonstrate this <ggg>
Oh well, Its a good thing we have MULTIPLE sources of info.
Regards,
Scott |
