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

To: Chris who wrote (157702)	6/7/2000 2:10:00 AM
From: TTOSBT	Read Replies (1) \| Respond to of 176387

Re: "Dreman Article" Chris thanks for posting article. It's interesting how Mr. Dreman stakes his claim due to lack of faith in analysts. While his own study shows them to be correct 58% of the time over a period of 25 years. What's more amazing is, that data was forecasts of results published immediately before the actual releases! Of course the article states this fact in the negative by claiming; "Over that 25 year period the analysts missed by an astounding 42% on average." Then he goes on to state: "People who rely on these estimates periodically* get clobbered."* So I guess Dell has a 58% chance of meeting or beating estimates on average? In his Dell bashing he uses SUNW's 90% reinvestment in R&D spending against Dell's 26% but neglects to mention that a good portion of Dell's research is done for them through MSFT/INTC. And it goes without saying Dell has a lot of room to increase their reinvestment while SUNW is just about topped out! He also stated that Dell used the other 74% to buy back their shares. Well wouldn't that increase the EPS? Oh yeah the article never mentioned that Dell has a P/E of 63 next to SUNW's 95. He finishes off by suggesting to short Dell "if your brave". TTOSBT

To: Chris who wrote (157702)	6/7/2000 11:07:00 AM
From: D.J.Smyth	Respond to of 176387

re Dreman's opinion: While both are considered blue-chip tech stocks, here the comparison ends. Dell is primarily a box manufacturer with a growth rate that will decline as the personal computer industry decelerates. Dell recently told FORBES it would like to be the leader in the exploding market for large servers. Good luck. That's an area Sun dominates, and likely will continue to dominate. Firstly, SUNW's dominance has been directly related to their chip manufacturing and system design. Dell's recent acquisition and heavy reliance on Intel's new devotion to meeting the SUNW challenge helps give Dell a leading edge. Secondly, SUNW's dominance is fully dependent on a functional "PC society" where boxes are prevelent. If the PC market declines, SUNW could also delcine. SUNW must redefine their operation as "Server/Slave" versus "Server/PC" (current definition). The "Server/Slave" market remains more expensive than a singular PC society or market for countries than have neither operation. Tech dominance demands investing heavily in research and development. Isn't it irrelevant whether you "invest heavily" in R&D or purchase that R&D from others? Those who purchase their R&D from others can pick and choose which block of intellectual property they want to utilize. Those that invest heavily must make certain they make little to no mistakes as to where they place their dollars (thus SUNW's reliance on their own chips). Sunw's reliance on their own ASIC designs has helped them. Intel says they can help change that for their "partners", the biggest of which is Dell. Sun spent an average 10% of revenues on R&D over the past three years. Dell's R&D budget is a slim 1.5% of revenues. (Both are before purchased R&D.) Dell is spending much more buying back its own stock. Again, this is irrelevant. Dell's purchased R&D comes under their operations category - as Intel and others do the R&D for them. So, no, Dell is not just a "box manufacturer". They "sell" the R&D others give them for pennies on the dollar relative to the systems that leave their door. Let's go to another benchmark of a good tech stock: How much of net income is plowed back into the business, which is crucial to generating future earnings. Sun reinvested 90% of income over the past three years. And how much did slower-growing Dell spend to catch up? A mere 26%. Dell's remaining 74% went to the stock buyback. Again, the repurchase of shares is considered "plowing back" revenue into the business. It is generally irrelevent whether you "plow back" revenue to the R&D department with failed designs or you "plow back" relative to rewarding employees through options, and repurchasing those converted shares on the open market. Dell's tremendous growth rate (which is not slower than SUNW's by the way - I don't know where he gets this) has resulted in the need for Dell to buy back shares on the open market. They save on buying their R&D from Intel and others. This savings is translated into rewarding employees. The hard truth is Dell's far better at marketing than at tech innovation. And who is Dreman to say that Intel's R&D department is any less intelligent than SUNW's? SUNW has to devote dollars to both - marketing and R&D - eclectics can get into trouble as often than those that depend heavily on marketing. Dell prefers gathering the faithful to quarterly extravaganzas and major outside conferences, regaling them with the glories of the company's future. That so many first-rate analysts buy this act is a sign of the times. Oh please. This is a low blow. Dell buys an analyst a pepsi at a meeting and this is considered an extravaganza? Give it a rest. If you're brave, short Dell (46, DELL), which is what I'm doing. In other words, Dreman is brave. That must make me not so brave. It also makes nearly all long shareholders dumber than he. There are still 15 long to every 1 short. This means that the 1 short is smarter than any of the 15 long. i keep reminding myself that China, despite it's political faults, remains (a) the largest paging market in the world, (b) the third largest cell phone market - and will be number one in 1 1/2 years surpassing the US at their current growth rate, and (c) the number 1 growing PC market in the world. China's current PC rate is 1 to 55, while the US rate is 1 to 3. Companies will supply the Chinese and the South Americans with PCs. SUNW's market is designed for mature PC embedded environments - where strong server growth is built on a strong PC base. Dell has the opportunity to capture both markets - the strong PC market and build a server base as well as the market where PCs are currently non-existant. If we, in our limited vision, think of Dell as "primarily a box maker" going forward, then SUNW's vision can be considerably worse - as they are heavily dependent on the "primary box society" for their Servers to be installed. maybe Dreman drinks too much grapefruit juice; who knows. We do know he's braver and smarter than any long. I think longs are fully aware of Dell's probability relative to earnings of $.21 coming up. Nevertheless, there are 400 million Chinese still waiting for handsets and PCs. That doesn't include the 280 million south of China or the 400 million in India as well (those considered able to afford a PC - these numbers are my personal projections over the next six years relative to affordability derived primarily from cellphone research).