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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Hawk who wrote (17771)	2/20/1998 2:55:00 PM
From: Wei G. Ho	Respond to of 97611

Dell's fourth quarter sales were strong across geographies, with the Americas up 51%, Europe up 61%, and Asia-Pacific rising 79% thanks to a concentration in Japan, Singapore, and Australia, where the fallout from the Asian economic crisis has been less severe. American sales benefited from a near doubling of the consumer business thanks to the company's burgeoning website, which is now doing $4 million a day in business. By marketing to more sophisticated consumers and avoiding the low-margin "under $1,000" PC segment worked by rival Compaq (NYSE:CPQ - news) , Dell kept its average desktop selling price at $2,000, down 4% from last year but still well above the industry average of $1,296 for PCs sold through retailers. The company's overall average price was $2,600 thanks to 250% growth in the enterprise server and workstation business, which accounted for 11% of sales during the quarter versus just 6% last year. Dell managed to reduce inventories by quarter's end to a stunning seven days versus 11 days in the third quarter and 13 days a year ago. By contrast, Compaq's best effort to follow Dell's lead left it with 24 days of inventory at the end of its fourth quarter. Such stellar inventory management allows Dell to take advantage of falling component prices more quickly, thus offering lower sales prices while still claiming higher margins than its competitors. With the company on a pace to do 52 inventory turns a year and accounts receivable nudged down to 36 days, Dell pushed return on invested capital to 217% (annualized) for the quarter versus 186% a year ago. Although Dell now trades at 35 times the soon-to-be higher FY99 EPS estimate of $3.48, it could very well still be cheap considering that sales are growing at three times the industry pace and Dell can continue to use its cash to buy back shares. Given its own performance, there's probably no better investment management could make.