I wasn't surprised by Dell's earnings, so much as Michael Dell's bullish comments before the earnings. I think many took that to mean Dell would blow away the #s like in the good old days. When that didn't happen I think a lot of credibility was lost - fairly or not. From now on people will become a lot more skeptical of what the man says. When a stock is priced to perfection, any tiny shadow can have huge consequences. The report itself is very positive IMO - it's hard to fault Dell's performance. But that is not the point - the shareprice is at a level where such performance *and better* is necessary in order to maintain price momentum in the stock. Following the Feb blow, this is another (minor) blow. This is a great company by any measure. But the stock may have seen its greatest appreciation. From now on, the "benefit of doubt" will not be there anymore - Dell will have to "earn" a higher multiple the hard way.
Interesting comparison to MSFT. In some ways, MSFT can also be said to have had it's greatest growth behind it (by this I mean share appreciation year on year). But the reason I have no intention of dumping MSFT, and why it continues to be the anchor of my portfolio, is that MSFT is such a diversified company, with such tremendous resources, and such far-reaching management, it is possible, just possible, that MSFT will actually be able to enter another high speed growth stage that will last for years. From this point of view, I feel a lot better throwing MSFT into my portfolio and "forgetting" it. I can't say the same thing about Dell - great company though it is. |
