Jim, let me take you through my thinking on my Q1,f00 unit forecast of 14.7%.Although it is still very early in the quarter to try and estimate DELL's unit sales most of the evidence to support my forecast is anecdotal. As such, I view my forecast as somewhat educated guesstimating.
1] Q4,f99 DELL CC indicated that they would have achieved an additional $200 million in sales had they been more price aggressive. This suggested that DELL would take a more aggressive posture in Q1. Win rates of 50% to 60% on corporate contracts in Q1 seem to back this up.
2] Q4,f99 DELL CC stated that pipeline fill going into Q1 was unprecedented for this period.
3] Although DELL achieved 11% sequential unit growth in Q1,f99 this was on the heals of 2 very strong quarters [Q3,f98 and Q4,f98 had sequential growth rates of 16% and 19%, respectively]. In Q3,f99 and Q4,f99 the growth rates were much more modest - 11% and 10%, respectively. This was due to deferred spending to 1999 on Y2K and Intel's P3 and pricing issues on the part of DELL.
I believe we're due for a very strong quarter in Q1,f00.
4] Microsoft indicated last week that PC sales were strong.
5] Intel did not warn suggesting that P3 sales may be better than expected.
Now, in trying to determine the Q1 estimate I started by reworking the monthly unit sales in order to resolve the differences between IDC and DELL's actual sales.
Month...........unit Sales.........DELL Q............IDC Q
Sept.98.............700...........................................1999
Oct.98...............700....................2001
Nov.98..............850
Dec.98..............765..........................................2315
Jan.99...............585....................2200
Feb.99...............800
Mar.99...............850..........................................2235
Apr.99...............875....................2525
As you can see the January sales were an anomaly.
Using this kind of framework my 14.7% sequential unit growth over Q4,f99 does not look out of place and, given the rationale in points 1] through 5] appear very realistic.
The one number that sticks out is the IDC estimate for Q1, 1999. If I'm correct IDC will report negative 3.5% sequential growth over Q4 on April 23. This should create an excellent buying opportunity for DELL given that I expect them to generate $0.175 eps, well above the consensus for this quarter.
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