Michael,
If I understand you correctly, you expect technology growth to slow much before it reaches 50% of the US economy. I disagree with you, but that simply is my opinion. Also, I believe that the boundary between technology and non-technology gets blurred so fast these days that the argument is in some sense to no avail. For example, speaking of food and clothing, what role you you think better imaging tools and molecular designing of compounds going to play in future? And speaking of housing, what impact would computer based simulation have on city planning?
As for my comment about margins and consumption, my argument really is that the industry may not continue with indefinite margin squeeze, revenue stagnation and earnings growth. Sooner or later earnings are going to turn into losses, which will cause some bloodshed and massive consolidation hence enabling those companies left standing with firmer revenues growth. In fact, I suspect that this is precisely what is happening now as DELL continues to take market share away from it's rivals. So, while the sector may suffer, some companies will drop out and the remaining may very well do well till they become the sector. For DELL, that's years away. Which is precisely the opposite of that of the possibility of bankruptcy for certain other companies in the bigger h/w sector. And bankruptcy sometimes makes even the most irrational CEOs think rationally. However, the MPC market may very well be maturing OTOH ... it remains to be seen IMO.
As for diversification, I am amazed to see that you consider it to be a negative! Would you much prefer that DELL be a one-trick pony? In particular, the diversification is in very related areas, server, storage and internet commerce.
As for the discount rate, of course one needs to add an equity premium to account for DELL's riskiness. The point, however, is that if DELL is fairly priced at 6.5%, using the same equity premium DELL is undervalued if the interest rates fall in future (which I expect to happen) other things remaining the same.
-BGR. |
