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: Meathead who wrote (161892)	10/7/2000 11:57:33 AM
From: rudedog	Read Replies (1) \| Respond to of 176387

Meat - it seems obvious that part of the problem has been overconfidence on the part of management, MSD in particular, about how quickly they could move into enterprise and storage. Sure, the basic premise is accurate - there is a big part of that market which would be attracted by a better value proposition, and DELL's model gives them many of the same advantages as they have in the PC business. But there are also barriers to entry - the need for more comprehensive service offerings and more highly integrated products, and the increased need for a "complete" offering - that make rapid penetration difficult. Also, the "direct" model is harder to implement - That class of customer needs more hand holding, which is why much of that market still buys from systems integrators. DELL needed to do 2 things (both of which they are working on). First, they need to provide products which are closer to "plug and play" such as the server appliances. This reduces the need for installation support and increases the market for direct sales. Second, they need to increase programs designed to attract the SIs, who currently view DELL as potential competition for their business, and rightly so. When I look at the guidance given by Capellas in January of this year, which many regarded as weak at the time, in comparison to the position taken by DELL, it's clear that the CPQ position had a lot less downside risk. Capellas gave guidance for revenue growth of 10 to 12%, with a "stretch" goal of 15%. He then laid out the areas where CPQ should be held accountable - make the PC business profitable, develop new classes of products in both the enterprise and consumer spaces, and shift the revenue mix more to enterprise. He also gave guidance around the anticipated increases in both gross and net margin, with the product lines which would deliver those increases. This did not rocket the stock, but as the year rolled out, those projections have been seen as increasingly realistic. DELL had the opportunity to do the same when they revised their projections in late January. They could have set a range of possible growth targets (as they finally did this week) which would give forward guidance factoring in market conditions. If they had said then the things they are saying now - "we will grow at a significant multiple of the market, between 1.5X and 2X, we will do it profitably, and based on what we see the industry doing today, that means growth of between 25% and low 30s this year", the stock might have taken a bigger hit initially, but would have recovered as analysts saw that DELL was realistic. The focus would then have been on how much better DELL responds to changing conditions, rather than on specific top line numbers. I am still concerned that the focus is still too much on the absolute numbers, rather than on how DELL will leverage its advantages to produce industry-leading growth, efficiency and profitability no matter what conditions turn out to be. Vanderslice and Rollins went a long way in tat direction this week. MSD seemed to be reluctantly moving to a similar position. Time will tell I guess.