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 Bear Thread -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (243)	3/20/1998 11:49:00 AM
From: rudedog	Read Replies (1) \| Respond to of 2578

Perception will be the key here. If they can satisfy the requirements for service through a model which actually subcontracts most of the work, and give customers the feeling that Dell still 'owns' the service responsibility, they may be able to pull it off. That is what CPQ tried to do with their global service program in 1995. CPQ came to the conclusion that customers especially in the high end were not buying the concept, also that leading with service would be the key to rapid growth against HP and IBM - this was in a lot of the press material around the DEC acquisition. Dell has been more adept than CPQ at selling the sizzle. I think they will continue to drive their high leverage model as long as growth stays on track.

To: jjs_ynot who wrote (243)	3/21/1998 10:21:00 AM
From: Ally	Read Replies (4) \| Respond to of 2578

Hi Dave, Here's my contribution to your fine thread this week, hoping to raise comments and personal point of views from others, bears or bulls. I played around with my Dell financial spreadsheet....and here are the observations looking forward. To meet analysts expectation, Dell's revenue for 1st quarter should come in around $4,011 mill, which is 55% growth above last year's first quarter. Assuming no deterioration in margin ( margin stays at 22% of sales), no increase in operating expenses (12% of sales), and a unchanged tax rate (31%), the net income would come in at $301 mill. By buying back 10 mill shrs, the eps would come to 43 cents, 1 cent above analysts expectation of 42 cents. First quarter will be a challenge for Dell.... watch carefully for announcements from Dell. If Dell continues to buy back shares at 10 mill/quarter, sales revenue can slow down (less than 50%) or margin can deteriorate proportionately for 2nd, 3rd, and 4th quarters and still meet analysts expectations. It appears that the First Call consensus have taken into account a lesser rate of growth than 50%. For example,at 40%, 35%, and 30% revenue growth in the 2nd,3rd, and 4th quarter and maintaining margin and expenses at the same level, and assuming continuation of shares buy back, Dell would be able to meet the earnings expectations set (conservatively) at 43 cents, 48 cents, and 53 cents respectively for the quarters. However, this would drive down the eps growth rate to 40% from the present 50%. Based on these calculations, my estimate of high share price potential is 40 pe = $1.86 x 40 = $74.00. However, if the market looks forward and see a more nominal growth of 30%, the share price would drop to around $56. So, my guess of Dell's trading range this year is $56 to $74. The way I see it, (FWIW), the modest + 13% potential gain in buying the stock this year (at today's trading range) is not a good idea considering the associated market risks. Shorting the stock is also not lucrative, since the estimated maximum profit would not exceed $10. However, short term trading to take advantage of the stock volatility, can be lucrative, provided one is agile in going in and out quickly. Risks outweigh rewards in buying Dell this year, IMO. History has shown that the fortune of tech stocks can turn at a dime, especially commodity stocks. Western Digital went from 67 cents per share Sep/97 (86% growth over last year) to practically zero the following quarter because of the drop in demand for hard-drives (or over production, either way, deflationary factors) and that subsequent lead to price war. Compaq warned of zero earnings from $500 million the quarter before! Despite Dell's unique and successful methodology in selling pcs, I doubt it is immuned to a softening business cycle. d