To: Rio Jangada who wrote (23996 ) 12/3/1997 6:35:00 AM From: Jeff Tribble Read Replies (2) | Respond to
Dell has become one of the surest bets in the entire market. You mention their lack of a proprietary technology. They have the most valuable proprietary technology around.......manufacturing efficiency, asset management and execution prowess. Dell is benefiting from a steep decline in component costs due to overcapacity. Processor, hard drive & memory prices are plummeting. Dell's inventory management is so superior to their competitors (11 days supply on hand) that they continue to gain market share because they can lower prices in a more timely manner and pass the savings right along to customers because they have no inventory of higher priced components like Compaq, Gateway, IBM, HWP, etc who carry much higher inventory levels and have to work through the older higher priced inventory before they can lower prices without hurting gross margins. As far as lofty built-in expecations, the estimates for DELL in fiscal 1999 (jan '99) are extremely conservative. The estimates only call for 33% earnings growth, DELL will smash them. Their server and workstation business is just starting to take off, they will continue to grow at over 3 times the industry average because, frankly, nobody can compete with them on the execution front. In summation, DELL more than deserves a 30 multiple on their current qtr earnings because visibilty is excellent for at least the next 4 quarters. Meaning DELL is a screaming buy at any price below $83. It also means when they make $1.04 in the Oct '98 qtr (minimum) the stock will be trading north of $125. Only a fool would be anything but long a company with fundamentals as solid as DELL's.
