stock bull,
After hours on a Friday evening is not a good indicator of anything. For example, CPQ was down by only 10% in after hours. Well, after missing the estimates by 50%, it probably has a longer way to go. OTOH, only yesterday the DELL management has said a few things which in hindsight looks like as if mentioned specifically to prepare investors for this fiasco. It may be wishful thinking on my part, though.
I do agree that INTC earnings is very important. However, the AMD-CPQ-IBM connection should be a somewhat clear indicator of things to come.
But this is all short term. Long term, I believe DELL's future hinges on five things, and desktop sales is not one of the five. In abstract, DELL needs to grow revenues by 40%+ for at least two years and earnings by 55%+ for the same period for it to have the same kind of price appreciation it has seen in the past, IMHO. To achieve that, I gather the focus areas are:
1. Servers. NT, perhaps, or even Linux. I don't think it is important to elucidate this point. However, I doubt whether this is going to a major revenue earner, as there is serious price pressures in this front. However, it leads to another area with juicy revenues.
2. Having the ability to service the server sales. This is an extremely lucrative business, where, I suspect, DELL doesn't have a lot of first hand experience, yet. I am watching DELL's progress in this front.
3. Commoditizing storage sales. Here, EMC has a clear 3 year+ lead. Which usually means DOA for the challenger unless the champion pulls a CPQ (I doubt if EMC will oblige). However, DELL has shown itself to be an extremely nimble player. Incidentally, my experience with DELL storage devices has not been overwhelmingly positive. (Note that the sample space is of size 1, so this is not representative of anything.)
4. Generating incremental peripheral sales from server and storage sales. This is one area where DELL has natural ability by leveraging it's highly successful eCommerce strategies. This is also an extremely lucrative business with not great, but steady, margins. The question I have in mind is whether this is going to be expensive when support is involved. Gigabuys.com falls under this broad domain.
5. Pushing margins up by going internet on one hand and avoiding support intensive businesses on the other.
I am starting to believe that the desktop era is over, if DELL has to grow at the same rate at it has in the past.
But why are we discussing this on a Friday night? DELL didn't warn, CPQ did.
-BGR. |
