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

To: dwdkc who wrote (160931)	9/21/2000 6:42:06 PM
From: D.J.Smyth	Respond to of 176387

dwd, re europe and Dell Intel's strength in Europe has been through the desktop unit. Intel sells to several manufacturers in Europe including Dell - the greatest percent going to the desktop unit. Laptop and Server sales in Europe are increasing. These are the higher margin areas for Dell. The increase in the laptop and Server sales are more than offsetting any weakness Dell is witnessing in the desktop unit. But, Andrew believes that Desktop sales in Europe will strong rebound in the 4th qtr even as laptops and servers are doing so now. Because of Dell's plant in Ireland they've also been able to decrease susceptibility to a falling Eurodollar.

To: dwdkc who wrote (160931)	9/21/2000 6:47:28 PM
From: Maverick	Read Replies (1) \| Respond to of 176387

ML:high confidence DELL Q3 is on track, meet or beat Euro forcast Excerpts fr Merrill Lynch 9/21/00 Investment Highlights: • We have a high level of confidence that Dell’s October quarter (Q3) is tracking on plan to deliver our sales and earnings estimates of $8.475 billion (up 24.9%) and $0.25, respectively. We believe that demand continues to remain on target across all business segments and geographies. • Dell appears to be gaining significant traction in small business even without VAR partnerships or local presence in these markets. The government sector could come in slightly ahead of plan owing to very conservative expectations due to Q2 softness. • We also feel good that Dell is tracking on plan to meet or beat its conservative expectations in Europe although there doesn’t yet appear to be any significant pick-up there in corporate demand. • We view the October quarter as critical to the Street gaining more confidence in Dell. We currently see Dell as having one of the lowest risk profiles with respect to either a top or bottom line 3Q miss. • Using 45x next year’s EPS estimate of $1.20 suggests a $54 price objective, up 40% from current levels. We reiterate our Buy rating on Dell shares. Quarter On Track We have a high level of confidence that Dell’s October quarter (Q3) is tracking on plan to deliver our sales and earnings estimates of $8.475 billion (up 24.9%) and $0.25, respectively. We believe that demand continues to remain on target across all business segments and geographies. With respect to the various customer segments, we believe that the consumer business is meeting expectations with good call volumes while the US corporate market is also seeing good demand, with particular strength in the small business area. Dell appears to be gaining significant traction in small business where the so-called white boxes typically dominate even without VAR partnerships or local presence in these markets. The government sector could come in slightly ahead of plan owing to management’s very conservative expectations due to softness in Q2. We estimate that government sales comprise roughly 15% of the mix in the third quarter. We also feel good that Dell is tracking on plan to meet or beat its conservative expectations in Europe although there doesn’t yet appear to be any significant pick-up there in corporate demand. Japan and Asia Pacific (along with the small business segment) are currently Dell’s highest growth areas owing to significant strength in corporate demand in Asia Pacific and generally strong consumer demand across the entire region. Corporate demand in Japan, however, continues to rebound slowly. Margins Improving We are modeling a 3Q gross margin of 21.1%, up from the 20.2% recorded in the third quarter of last year, but down slightly from last quarter’s 21.3%. The gross margin could come in higher due to the unexpectedly good DRAM pricing climate this quarter. Flat panel display supply continues to improve, and we do not envision any real notebook shipment constraints in the third quarter. Microprocessor supply issues have receded, and we believe that Intel is executing in terms of supply. Our 3Q operating margin assumption of 9.8% represents an increase over last year’s 9.6% and the previous quarter’s 9.6%. We believe that Dell has the ability, due to an increasingly favorable mix shift towards notebooks and the enterprise, as well as its drive to more Internet-related sales, to return to, or perhaps to even exceed, its historical operating margin levels of 11% over the next twelve to fifteen months. Year Should End on a High Note Our outlook for the PC industry’s December calendar quarter remains bullish. We consider the September quarter to still be somewhat of a hurdle that needs to be overcome before investors begin to pile into the PC names in order to take advantage of the typically positive seasonality. We continue to estimate a 30% revenue growth rate for Dell’s fiscal year (ending January). We view the third quarter (October) as critical to the Street gaining more confidence in Dell. At this juncture, we consider Dell as having one of the lowest risk profiles with respect to either a top or a bottom line miss in the third quarter. While at this time we believe that Gateway and Compaq could offer better near-term (3-4 months) performance, Dell’s long-term strategy and growth prospects remain the brightest in the industry. [This should bode well for AMD as CSFB reported that AMD would meet the 3.6 M uP unit shipment for Q3 due to a surge of order from CPQ in Sept] Though in the past we have argued for a 50-55x multiple on Dell’s forward consensus EPS estimates, we now think it is more prudent to use a 45x multiple in light of the company’s recent problems and partial loss of credibility. Using 45x next year’s EPS estimate of $1.20 suggests a price objective of $54, up 40% from current levels. We reiterate our Buy rating on Dell shares. Table 1: Dell Annual Earnings Model ($ in millions, except per share data) 1998 1999 2000 2001E 2002E Sales 12327 18242 25264 32833 42026 Cost of Goods Sold 9605 14137 20046 25943 33411 Gross Income 2722 4105 5218 6890 8615 S,G&A 1202 1787 2387 3236 3967 Research & Development 204 272 374 506 609 Total Operating Costs 1406 2059 2761 3742 4577 Operating Income 1316 2046 2457 3148 4039 Interest and Other Income 52 39 188 515 605 Pre-Tax Income 1368 2085 2645 3663 4644 Income Taxes 424 625 785 1099 1393 Net Income 944 1460 1860 2565 3251 Diluted Earnings Per Share 0.32 0.53 0.68 0.94 1.20 Average Diluted Shares 2952 2774 2730 2729 2720 Source: Merrill Lynch Technology Research and Company Reports

To: dwdkc who wrote (160931)	9/21/2000 6:48:33 PM
From: hdl	Respond to of 176387

don't use leverage

To: dwdkc who wrote (160931)	9/21/2000 8:55:08 PM
From: TigerPaw	Respond to of 176387

what is the real deal in Europe? People in Europe are not going to pay a lot more for a computer this year than they did last year. Last year the Euro was $1.05, today it is $0.85 so even increasing sales show up as less revenue when translated to dollars. TP

To: dwdkc who wrote (160931)	9/22/2000 6:41:28 AM
From: kemble s. matter	Respond to of 176387

DWDK, Hi!! RE: 1) Is Dell doing better than the market as a whole (INTC) in Europe lately? 2) What % of Dell's sales are in Europe? If as I think they are under 10%, this won't necessarily affect them much. So do we take out another mortgage and buy more Dell calls tomorrow? Perhaps DELL's doing better in the enterprise accounts there...The recent mention of "showing signs" perhaps is the tip off...And, let's not forget the mobile switch.. This sell off is ludicrous...Why the INTC % translates into these other %'s... Let's also remember what time of the year it is... Yes, IMO it's a buying opportunity I surely didnt' suspect... Best, kemble