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: D.J.Smyth who wrote (165446)	5/18/2001 7:19:26 PM
From: rudedog	Read Replies (2) \| Respond to of 176387

D.J. - pretty relentless cheerleading, but your points actually highlight issues which may concern many investors - they certainly concern me. Perhaps DELL management takes the head in the sand approach you advocate - but I hope not. Let's look at a couple of your points. You say: we must eliminate the fact that Dell makes more earnings per $1 in revenue than any of its competitors on its hardware sales. That its service revenue is growing faster than its competitors. That its marketshare per units is increasing. That Dell stated those revenue projections for next quarter were on the conservative side; a target they felt they could beat, at worst, meet. It's nice that DELL is more efficient than its competitors. It's not nice that they are pursuing a policy which has resulted in ZERO earnings growth, and will probably result in negative earnings growth in the future. If DELL is not growing earnings, it will not grow the stock price. The marketshare unit gains are a negative when they result in NO REVENUE GROWTH. Not only is the market not infinite, it is a very weak spot for DELL. They have concentrated on the market they already dominate - North America and the UK. Future gains in that market will be unlikely to be much more than the industry growth - which at the moment is close to nothing. If DELL can't keep grabbing big share from its rivals - something which will be increasingly difficult to do - the inevitable result is a decline in that unit growth rate. And guess what, DELL is already preparing people for negative revenue growth, the effect of declining ASPs in a stagnant market. DELL has shown a little growth in their more difficult markets, but they are still way down - that has been the "opportunity" for 3 years and DELL has made almost no progress. If the scorched earth policy goes world wide they may make some unit gains, but as I said above, it is earnings that count. Service revenue? Give me a break. DELL service is configuration and break fix. They have shown no inclination to do anything to change that, it works against the DELL model since it is a high fixed cost business. In absolute terms DELL is not on the map and in terms of professional services, they are not even a player. As you point out later on, they are pretty much dependent on IBM for any professional services engagements, so tell me why IBM would route any interesting business to anyone but IBM? Next, you highlight my chief complaint about DELL: We must not factor in that Dell's enterprise division is growing faster than its competitors, even though unit prices are dropping. Forget that Dell's entry into thin clients will prompt replacement of earlier branded servers at an increasing rate DELL's enterprise division is NOT growing in revenue terms despite a claimed 43% increase in units. Where is the money going???? DELL's server pricing, especially on the low end, is even more aggressive than its desktop pricing. They seem to have decided that share gains are worth any cost. And I don't understand your thin client comment at all. Is DELL engaged in some thin client strategy that I have missed? Thin clients are not a big or fast growing market except in the fantasies of Larry Ellison. And there is no particular reason that thin client adoption, even if it were happening, would drive server replacement. The rest of the things you mention do not particularly favor DELL over its rivals - DELL has no special reason to get an advantage from the XP launch, or broadband, or wireless - they are a technology laggard and not all that close to Microsoft. I believe that DELL's strategy is a simple one - perfect the low cost, low inventory, fast follower model, hit the sweet spot on product lines, don't do anything that requires R&D or investment outside of efficient product delivery. They need to show that strategy will deliver the financial performance they need. The rest of your diatribe is just general industry commentary which applies as well, or better, to DELL's competitors than to DELL itself.