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

To: Irish King who wrote (33179)	3/9/1998 1:57:00 AM
From: Chuzzlewit	Respond to of 176387

The point I was trying to make was that if Asia has any immediate impact on Dell it will be positive, but note that the PRC was not impacted by the problems that plagued Korea, Thailand and Malaysia. Most observers agree that the problems in Asia will be over in no more than 18 months. If there is a spillover from Asia in this country it will be one step removed. That is, US businesses that export to Asia will be hurt, and thus sales by Dell to those companies could be impacted. But the direct effect of Asia on Dell is positive. Because of Dell's extremely efficient inventory system it can take full advantage of dropping component prices for thing like hard drives and monitors. This gives it a competitive cost advantage over every other traditional (i.e. channel) company. The only potential issue that I see is the possibility of a temporary decrease in demand for computers. However, the articles I posted earlier from IDC and Dataquest seem to point to no slowdown. I find this much more compelling than Phillip Crone's anecdotal evidence, or Compaq's experience. So, I conclude that Dell will post reasonably good numbers this coming quarter. The second issue to deal with is Compaq's bloated inventory. The problem is that we don't know exactly what kinds of machines are sitting in inventory. However, the evidence seems to indicate that it is most probably previous generation machines and consumer machines. If this is true it will pose no problem for Dell. How the stock market reacts is entirely a different issue. I still believe that Dell is likely to be punished in the short run. But the short run might consist of ony a couple of hours. I don't know. But this I do know: if what I've laid out for you makes sense from a business perspective, it would be madness to short the stock because you are relying on a valuation methodology that is absolutely elusive. A few days ago a poster came on the thread claiming that Dell was undervalued. I gave him as hard a time as I give those of you who claim it is over-valued. No one has come up with a satisfactory valuation methodology for growth stocks. PEG systems are naive because they fail to take into account the riskiness of the business or the prevailing long term interest rates. Reliance on the balance sheet is patently absurd. So my advice to you would be to avoid investing in a stock you feel is over-valued. Shorting it is like playing with fire, because not only must the price of the stock decline, but it must decline before it has a further substantial rise or you may be forced to cover. Regards, Paul

To: Irish King who wrote (33179)	3/9/1998 1:57:00 AM
From: Satellite Mike	Respond to of 176387

I also admire DELL and Michael Dell very much. It's certainly one of American's greatest success stories, but I believe a down cycle is very compelling at this time (It'll come back, though.). Apparently, Michael Dell is such a workaholic he doesn't even have a chair in his office! For DELL to be valued higher than CPQ seems silly now. Even this weak quarter, CPQ will make over 100 Million more than DELL's brightest quarter. MV BABER

To: Irish King who wrote (33179)	3/9/1998 10:57:00 AM
From: David E. Taylor	Read Replies (1) \| Respond to of 176387

Dell already has one Asian manufacturing facility in Penang, Malaysia. I didn't see any effect on DELL's earnings or margins from the Asian currency meltdowns last year, did you? Michael Dell made the following point on CNBC last November after the Q3 earnings were released when he was questioned about the Asian currency effect: he said "which would you rather have -- a reduction in the selling price of 6% of your machines, or a corresponding price reduction of 86% of your components?" Take a look at DELL's gross margins -- they've been consistently 22% +/- 0.5% for the last 7 successive quarters. That gives you some idea of how good DELL is at adjusting its selling prices and controlling its manufacturing costs, despite the rapidly changing component costs and seasonal PC demand changes. David T.