Rude, Geoff....you are both making good pts....let me add, what I think, is one more..
We should not forget the impact of the Taiwanese earthquake on this year's results...take it out of the picture...and we would have had EPS growth somewhere in the high forties...and revenue growth somewhere in the low forties for this year....that would have coincided...... not to far from management's guidance that revenues/earnings would be "gently" falling from previous growth rates...also, I do agree, that EMC's acquisition of Data General...put some pressure on Dell's storage offering, and potential growth in the mid-range storage area.... Dell has been scrambling a bit here...Vanderslice should help...
But, Geoff has a good point here...Dell needs, should...and has successfully managed to entered markets when it was clear that the risk/reward and especially the EFFICIENT DEPLOYMENT OF CAPITAL was possible......CPQ has been a posterboy of what NOT to do here............Dell has managed, even as a, shortly, thirty billion dollar company, to maintain an incredible ROI....vastly outperforming almost all other tech companies.....however, as Chuzz has pointed out frequently, Dell is sitting on a mountain of cash and marketable securities..around five billion, I recall....and some of this SHOULD and MUST be deployed to more effecient purposes...than just six % in some money market somewhere.....I agree, that this next year, we should...and NEED to see some further expansion by Dell in new growth areas...although "same old, same old" will mean that Dell's growth will fall, likely slowly more than quickly, first into the high-thirties and then low-thirties- revenue, EPS, earnings.....Dell has huge cash generation gives them the flexibility of entering new markets....which can retard the decline in growth going forward...and perhaps flat-line that retardation it in some ways......but let's face it, even if Dell was in handhelds right now........and some other areas right now....it would be more of a PR move than anything else....it would not materially contribute to growth...results...at this time...except to drain cash from operations..
I think Vanderslice's hire will be significant here...I think he will be a great support in figuring out where Dell can expand next...and, once figured out, help make it happen effeciently and effectively....Main thing, I believe, is to remember that Dell has a core business which is going to grow at a nice rate...minimum thirties....over the next few years....AND the possibility of entering new markets...due to its cash hoarde......I will rely of Rudedog's expertise that this, entering new markets, HAS to happen soon.....This next year would seem to be the year...
For me, this is not THE disappointing thing.....the disappointing thing was the lack of savvy in which Dell handled the whole Taiwan affair....the analyst meeting where things were "OK"...and then a week later, coming out and saying they were going to miss....I think the market is still punishing Dell for that inconsistency....for even if DRAM prices did spike...which, it certainly looks like they did....Dell got "cute" and cut it too close with the analysts....although not a grevious error.....it creates a bit of mistrust between management and everyone else...IMO, that was unnecessary of Dell's part...they should have taken a more conservative tact in that analyst meeting..
Edamo continues to have a contributing point....Other firms come out...Oracle the latest...and grow earnings at forty %...and their stock's bounce....Dell does it....and the stock does nothing.........It is truly mind-boggling to think...but it sure does look like other big tech companies gets a higher "E" premium in their stock...even though Dell has as effectively and effeciently used E-commerce as any.........I do expect that next year....many high-tech companies will get "Delled"...ie, that their stock price will more closely reflect their growth rate going forward...once it is realised that they can not expand GM and Sales Growth exponentially....Sun and Oracle will be two to fall into this camp soon...
It is only natural...Dell's stock price will and should more closely mirror its growth rate going forward at some point....we are likely at that point.. twenty-five to forty...that's a fine stock appreciation....
I would take exception with only one statement you made Rude....you said that you are thinking on selling based on this year's past performance....when was past performance EVER a good reason to sell a stock...unless you are a momo investor?? IMO, next year can not possibly be as bad as this year...events-wise..and therefore, the stock SHOULD DO better than this year.....I agree, though, that the onus is on Dell's management to come up with something good next year...should the stock continue to lag...if we DON'T hear anything...well, IMO, the stock should continue to grow at something near the growth rate in its "core" business...which, by all accounts, is, and will be, above thirty % over the next few years...even taking into account higher interest rates...that should mean that Dell's stock SHOULD be able to grow at twenty% or greater..based on the core biz alone.....for more growth, maybe Dell will need to show the direction we are all waiting for....
What wouldnt make sense to me..and would be overly-punitive, IMO...given the consistency and size of growth, both in the past, and future.....would be another year of ten %...or less.....stock appreciation....even if Dell can not wow us with new product/service offerings in the next year....and relies entirely on "same old, same old" international, storage, services to generate additonal % growth from the inevitable thirty % growth rates...
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