Tippet- When you ask Dell bulls to look at the "long-term trends in the industry"...how come you never mention:
(1) Sales are consolidating to the top 5 players (IBM, Gateway, Dell, Compaq, HP) at the expense of all the rest..this has been going on for quite some time..white box manafacturers and smaller players losing share over the last many quarters...some manufacturers (Tulip, Siemens, etc) have quit manufacturing PC's altogether...
Internationally, consolidation has been occuring at a rapid rate..
(2) ASP have been falling for quite some time...this is not a new phenomena..Dell has proven that it can grow revenue/earnings at a rapid rate in such an environment..
(3) PC's have been considered a "commodity" for quite a while (by many)..this is not a new thought/observation...
(4) Dell has had (what bears consider) a high PE for quite a while..
(5) Compaq, IBM and others have been implementing their "direct" PC models for many, many quarters now, but, by all appearances, have come nowhere close to closing the gap on Dell....IBM was so successful last year that they lost $1 billion dollar making PC's with their "new" model...IBM has shown the occasion desire to win bids at all costs, even at the risk of losing lots of money....of course, if IBM would continue this strategy over many years, it would have a damaging effect...However, there are clear signs that IBM wishes to do just the opposite: exit the business altogether..
(6) The PC business has always been competitive....it is not newly-competitive...
Many of the bear arguments have been in existence, in fact, during Dell's rise in the past 2-3 years....
However, I rarely see bears acknowledge this (as you put it) long-term trend: the trends (I listed) have been in existence for quite a while, during which Dell's stock price, revenue, and earnings has zoomed up the charts...the story in the PC industry has not really changed all that much...Y-O-Y Revenue growth has indeed slowed (industry-wide) from several years ago, but unit growth has not (much).....in fact, it looks like revenue growth (this year) will be better than last....
What has changed is that Dell is now growing revenue and earnings in the 40's (instead of the 50's)...the stock price has had to adjust for that...but consistent 40% growth will still get you pretty darn good stock appreciation in today's markets....Dell will continue to appreciate at a nice clip...not at 200% or 100%, but at a nice pace nonetheless....
Finally, bears continue to dismiss Dell's expansion into server, workstations, storage, E-commerce and other areas...these areas are providing very nice growth opportunities, indeed,....PC's are becoming a smaller % of overall sales going forward..... |
