John,
In effect, Kumar is looking for a 3-4% YOY ASP erosion. In view of IBM's 15% YOY ASP gain, this is entirely reasonable. I jested (in the Ask MB thread) when I said that I am salivating at the prospect of a flat ASP YOY, but many wonders are made possible by product mix shifts. If in fact DELL has been able to take some market share away from CPQ in the mid range server market, it is not entirely unlikely. Then there is the "big order" that was postponed in the last quarter and rolled into this one as well as gigabuys.com. So, the revenue growth seems to be in line.
If, however, DELL hits 45% revenue growth YOY, I expect the earnings growth to be more than 50%. First, if there is a product mix shift, there may be a margin expansion. Second, as you had mentioned to me in PM, the IBM deal may cut licensing fees. Third, with DELL dipping hard this quarter, some share buyback may have happenned, which improves EPS. Finally, last quarter DELL had 55% YOY earnings growth on 38% revenue growth. Extrapolating and applying the above three factors, I would estimate a EPS growth in the 55%+ range, i.e. an EPS of 18 cents approximately.
All this, of course, is pure conjecture. But I have gone over IBM and GTW's reports and found nothing that could be worrisome for DELL except for the fact the IBM has been aggressive in the corporate sector and has shown good results. However, even there IBM's product offerring compete more with CPQ than with DELL who are much lower in the hierarchy.
Over all, things IMO look good and I just purchased some May 47.5 calls (which I most definitely should not have done as I do not buy front month calls on principle).
-BGR. |
