Michael,
But manufacturing did end up being the largest economic sector and led to the post WWII boom. 50% is just a number ... it is the scale that I am more interested in. And if you include information in technology, the future looks even more complex.
As for industry bloodshed, every single report out of the company indicates to me that DELL is one of the least impacted by the bloodshed. Hence, I prefer not to extrapolate the industry's problems to DELL to the same extent as CPQ, for example. And a relative assessment of DELL vs. CPQ's price, growth and future prospects tells me that either CPQ is way overvalued or DELL is way undervalued (or both, which I think is the case). In fact, you may even include IBM and HP in the same comparison. GTW, though, seems to be an exception.
Traditional finance theory claims that investors can do the diversification on their own hence they should not pay extra premium for diversified companies. However, it doesn't advice companies against diversification into related fields where they have potential to strengthen their top and bottom line. Ultimately, if there is superior top and bottom line growth, investors pay a premium. Whether or nor that resulted from diversification is not relevant. Therefore, my point was not that DELL deserves a premium simply because it offers a diversified product line, but because they have the potential to improve their balance sheet via diversification.
As for interest rates, there can be aberrations. I was focusing on the simple case, where lower interest rates are better for equities. But given the example of Japan, I do agree that this is not an inviolable relation.
-BGR. |
