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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Alohal who wrote (145858)	10/27/1999 8:51:00 AM
From: rudedog	Read Replies (1) \| Respond to of 176387

Alohal - I don't think DELL would have given the advice they did if the numbers were at the high end of the range. On the other hand, they did not say they would miss earnings estimates, despite much press to the contrary, and based on events over the last few days, I think .20 or .21 is more likely than the lower numbers we have seen. I also think Kumar and Niles will be re-trenching over the next few weeks. They clearly missed the boat on CPQ - Niles had predicted a "disaster" for CPQ and Kumar was sure that they would be under expectations. They tarred DELL with the same brush. The IDC and dataquest numbers show that the industry slowdown did not happen. CPQ's numbers indicate that CPQ grew with the industry. Since everyone else is indicating at or below industry growth, DELL seems very likely to be the one leading in volume. I will be interested to see how those two "analysts" explain a sudden reversal in their opinions without admitting that they have no real idea of what will happen...

To: Alohal who wrote (145858)	10/28/1999 4:04:00 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 176387

I couldn't agree more that Dell looks to be the big winner. The question is how big. I am increasingly feeling like Dell actually has set up the 3Q reporting period to surprise very big to the upside. If BBS revenue estimates (per Tiger Paws post # 145856) of 6.8B are correct, then @ 10% margin EPS would be about .27! Even @ 9% EPS = .245 and if margins were truly squeezed by the DRAM problem down to 8%, EPS would still be .217! Even using the more conservative 6.75B the numbers are: 10% = .27 9% = .243 8% = .216 These figures all based on 2.5B outstanding shares. These numbers sound spectacularly good to me. Am I missing something here? Alohal, Don't get me wrong, I've been a Dell LTB&H Bull since 1995. I just want to discuss the numbers and see how you came up with them. I think you might be missing something in those numbers. Let me elaborate. The historical net margins for Dell over the past 12 years show a range from 1.3% to 7.9% on an annual basis. If we look at just the last eight quarters - they have stayed in a tight range between 7.6% to 8.2%. The largest quarter to quarter increase was the recent 5.1% jump from 7.8% to 8.2% that occurred in the last quarter. If a similar increase for Q3 were to occur, then Dell would yield net margins of 8.6%. In light of that, the 9% and 10% numbers you present above seem a little high in terms of historical expectations. I also wonder about the figure of 2.5 Billion shares. Diluted shares outstanding last quarter were 2.725B down from 2.738B the previous quarter, which in turn were down from 2.785B the same quarter the previous year. Either way - figure shares outstanding will be down about 12 million to 2.713B. A Dell share buy back program of 238 million shares doesn't seem to be in line with expectations. Do you have any information that Dell bought back that many shares this quarter? Maybe I'm way off here. Using even 2.7B shares out, revenues of 6.8B from the SSB report that TigerPaw presented, and margins of 8.2% only yields EPS of .207. This is before accounting for any impact from whatever the DRAM situation turns out to be. As I said, I am a LTB&H Dell bull. I would love for my thinking to be way off on the upside. Nevertheless, in spite of Q3 demand being strong, I think the upside is limited. A $65 million DRAM problem works out to a $.024 hit to EPS. Is it possible that Dell overstated the DRAM problem? Yes, I guess that could be a possibility. A quick check of Gateway and Dell shows this: Gateway currently charges $130 for an additional 64 MB of RAM while Dell charges $90. Regardless, even a $27 million DRAM problem still works out to a .01 cut to EPS. Third quarter numbers shouldn't really matter much unless one is a trader or holds options which are due to expire before February 2000. In a few months time, Dell will be valued by most investors based on FY 2001 earnings. If there is an earnings miss in FY 2000, it will actually make 2000-01 earnings growth look even better and thus will produce a lower PEG. Staying long on Dell.