To All, Dell's eps barely made the official, guided lower, estimates and missed all the whispers. The co. said in Jan that this quarter would suck and suck it did. Though hitting some numbers most cos. would be happy with, they were very shabby for a stock selling at 75 times eps. Of course, Dell buyers have never been interested in valuation or buying an operating business. It is the good vibes, dude, that makes this bowwow go up in price. <g> However, it is going to be hard for even the biggest Dell fan to get anything but bad ju-ju and lots of questions out of this report. Here are some quicktake notes:
1. This was easily the worst sequential increase in net income in some time. 2.1% from 4Q to 1Q compares fairly weakly to the 7% of last year. Revenues fared better, and the 7% sequential increase was certainly in line with the mid single digit guidance given by the co. Did somebody at the firm accidentally tell the truth or did they low ball the seqential revenues # and then got surprised? I vote for the second, but I would love to see Dell moving toward the former.
2. Basic shares were up from last quarter. Is that called a negative buyback? Makes no matter. The shareholders of this co. will never notice how their money is being spent. <g> Diluted shares were down probably because mgt. exercised options and then dumped the stock ASAP to the buyback monies.
3. Gross margin was down 4%from both 1Q and last year's 4Q. The price wars are taking a bite, but, so far, not a big one. Net margin was also down 4.8% from 1Q, but only a negligible amount from last year. Mgt. should be commended for these #s.
4. For the first time in several quarters, Dell did not run a receivables dump to goose the #s.
5. Dell does seem to have gotten a bit tardy in paying its bills vs. 4Q. They still would have made the rounded up eps number even without the extra interest, so I suspect this was just a fluke of the business.
6. When is the last time Dell has had to round down on their eps numbers? I never remember anything but upward rounding. Maybe that's why they call the Austin suburb Rounding Rock. <g>
In all, a brave little quarter for Dell the co., a disaster for Dell the bloated stock. And, the deterioration in eps growth rate, which will certainly accelerate this year, speaks of the true problems about to unfold. The puts look golden on this turkey.
Good Luck,
MB
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