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Technology Stocks : Dell Technologies Inc.
DELL 120.68-9.8%3:34 PM EST
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To: Patrick E.McDaniel who wrote (131242)6/5/1999 10:49:00 PM
From: D. Plen  Read Replies (1) of 176387
 
Re. INTC vs DELL: I too have often pondered the variation in P/E between Intel and DELL. Shouldn't INTC trade at a higher ratio than DELL, after INTC makes the brains, and DELL sells the boxes? Intel comes up with the technology and DELL and all the other computer makers basically assemble standard parts and ship em out the door.

The reason clearly must be related to growth and growth potential. INTC CPUs dominate the market and growth is by-and-large limited to the growth in the PC sector, which we know to be about 15% YOY. Admittedly they make lots of other stuff besides CPUs, but most of their revenue and profit comes from selling CPSs. This places somewhat of a ceiling on their growth prospects.

DELL on the other hand has a market share of only (~9%) that keeps on increasing. They can increase their revs faster than the overall PC sector, because they are expanding their market share. As long as this happens, and they grow faster than the sector in general, they will have faster earnings growth than the overall market, and Intel, by extension. That explains the preoccupation with general and overall earnings at Dell. If their growth rate is 2-3 times greater than the sector, they merit a higher P/E than the group.

D. Plen
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