Hi Geoff-
In order to put a little more "meat on the bones" of yesterday's discussion, I submit the following:
In early '99, Dell's management talked about a "gently falling" growth rate for Dell going forward...I believe, at the time, that Dell's internal projections were as such and that Dell's management expected (something like the following) for this past year's results (EPS):
'98 fiscal: 53 cents
Projection '99: 16+18+21+22= 77 cents (which would have represented 45% EPS growth, y-o-y)
Projection '00: 24+26+28+30= $ 1.08 (which would represent 40% EPS growth)....
Again, this is speculation on my part, but I believe Dell's management thought that EPS growth would fall "gently" from low 50's (beginning of 1999) to mid-40's (during 1999) to around 40 (during 2000)...as presented above...
Now, let me give you the current consensus forecast(s) for Dell, per Nasdaq, for fiscal 2000: (Q1) 22 (Q2) 26 (Q3) 28 (Q4) 30, or $ 1.06....
I believe, this year, Dell will be back on track to meet or beat earnings estimates each quarter (unlike this past year, in which we had one miss, Q3, and potentially a second in 4Q), and that overall EPS (for the year) will be around $1.08 (or matching, what I think, Dell's management projected for Dell's growth for the period, dating back to early '99)...In other words, this year, Dell would return to its previous (declining, but still strong) growth curve...and that the "one-off" quarters of Q3, Q4 fiscal '99....will be just that, "one-offs", and not reflective of Dell's "true" growth curve...
NOW, if Dell can only grow EPS in the neighborhood of 35% this next year (somewhere around $1.00 of EPS), or, starting with Q1, '00, .22, .24, .26, .28.....I would agree with you, there has been a permanent shift of the growth curve (slower than I expected)....and the .01 miss, to which you refer, would be significant...and Dell's stock price would be affected as a result...Given the lower base of earnings in '99, it is critical that Dell "overacheive" vis-a-vis '99 y-o-y results in '00....for the "one-offs" to be truly "one-offs"..
But, I am, as stated, expecting $ 1.08 in EPS this coming year, in some form or fashion (I don't know which quarters are going to surprise), which should, ironically, give us an INCREASE in y-o-y % EPS growth (vs. '99- due to the "one-off" Q3, possible Q4 results)....In fact, it is likely, if Dell can produce $1.08 for the year '00....Dell will produce a couple quarters of 50% or better y-o-y % EPS growth...which will certainly raise some eyebrows on the Street, but also will not be accurately reflecting Dell's true EPS growth rate...which has really fallen from around 45% (sans "one-offs") to 40% this year...and likely between 35-40% y-o-y next year (2001)....
I hope this didn't confuse you, I'm not known for my lucid arguments....<G> |
