Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: jim kelley who wrote (152375)	1/27/2000 10:01:00 AM
From: DYW	Read Replies (3) \| Respond to of 176387

BREAKFAST WITH THE FOOL Thursday, January 27, 2000 "It is a bad plan that admits of no modification." -- Publilius Syrus Dell Misses Estimates, Not Big Picture By Richard McCaffery (TMF Gibson) Direct sales PC company Dell Computer (Nasdaq: DELL) fell in after-hours trading last night after warning investors that fiscal fourth-quarter earnings (excluding extraordinary items) will fall about $0.06 shy of analyst estimates. The company said a shortage of semiconductor components and delayed purchases due to Y2K issues led to flat year-over-year earnings and slower-than-expected sales growth. Further, Dell said investors should expect 30% revenue growth from here on out since the Round Rock, Texas manufacturer is now a $25 billion company. Naturally, there was much wailing about the shortfall. I even heard one industry observer suggest Dell has gone too far with its just-in-time manufacturing approach, the implication being it will need to pad inventories a bit to meet blistering demand. Good thing Michael Dell is running the company, not this guy. It's not significant that the company missed estimates, plain and simple. Bumps in the road such as Y2K and fluctuating component supplies are part of doing business in the technology industry, and Dell will get things straightened out. For the long-term investor, these jags are no big deal. It is significant that the company's sales growth will slow to 30%, mainly because Dell's growth rate has defied gravity for so long. We knew the slowdown was coming, but it's still an event when it happens. What's forgotten in the earnings stir is that Dell is a better, more profitable company today than it was a year ago. That's a fact. In terms of its ability to generate cash, which is a major component of what determines a company's intrinsic value, Dell is actually picking up speed. Look at Dell's third-quarter income and cash flow statements for the last three years. First Nine Months 1997-1998 1998-1999 Revenue growth 52% 41% Net income growth 57% 18.8% Cash from operations growth 68% 83.5% Free cash flow growth 64% 95% Sure, the company's sales and earnings growth have slowed, but that's just what's happening on the surface. I highlighted the cash flow numbers since they're the best measure of Dell's real profitability, and you can see they're growing fast. As the company's influence, market share, and scale have increased, Dell's efficiencies flow right to the bottom line. There's no indication that won't continue. As for concerns about PC growth slowing, we hear it every year. Overall, growth seems to be slowing, but Dell is growing two to three times faster than the computer systems market, which means it's capturing market share in a very fragmented industry. Further, the company has barely scratched the surface internationally. As for the growth of information appliances -- believe it when you see it. Most of us do the bulk of our work on PCs and I think it will stay that way. Sure, I'd like to surf the Web in my car, but that doesn't mean I don't want a PC at home and in the office. Besides, if information appliances do take off, Dell will be right there. Not that the company doesn't have issues. The missed estimates/slowing sales growth story has to be reported, and it's worth tracking. Just don't miss the forest for the trees. In my opinion, the company's greatest challenge is the need to keep customer service levels high since there's been anecdotal evidence it's been slipping. Also the company needs to increase penetration in the server business. For the long haul, however, Dell has the technology, management team, and business model to reward shareholders for years to come.

To: jim kelley who wrote (152375)	1/27/2000 10:21:00 AM
From: JRI	Respond to of 176387

To anyone: Didn't Meredith, in the CC last night, say "low 30's revenue growth" AND NOT "30%", as is being reported, in some cases, and asked to Meredith today....he did not refute...could this be the new "lowered expectations" method...ie..not responding directly if someone understates (the already understated?) growth guidance. Thanks in advance.