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

To: Chuzzlewit who wrote (35271)	3/23/1998 11:12:00 PM
From: CRICKET	Respond to of 176387

Paul, It is confusing, all the info, and here is yet another article by Jubak, featured on Microsoft Investor: <Picture><Picture> ÿ <Picture> Check out Jim's Top Stocks ÿ Highlighted Companies 3-year vs. S&P Compaq Dell FDX Corp. National Semiconductor ÿ ÿ In my search for good stocks I try to keep bouncing back and forth from the company to its market. <Picture> Mining for Market Secrets Digging deep into a company and its market yields rich rewards. I hit paydirt on both Dell and FDX. By Jim Jubak Know what the most popular brand of PC was in 1997? (I'll make this easy: North American sales only.) Compaq? Dell? Nah -- neither. According to research by Channel Information Services, the "no-brand" PC was the winner -- the 6.4 million units assembled and sold by consultants and other resellers. Compaq (CPQ), the biggest-name vendor, sold 5.1 million. Dell (DELL) came in third at 2.9 million units. That's more than just a bit of technology trivia. A fact like that turns my understanding of a market on its head. It leads me to revise my thinking about which companies will be the winners and losers in a market, and about which factors will determine success or failure. In my search for good stocks, I try to keep bouncing back and forth from the company to its market. A careful study of a company raises questions that lead me to take another look at the market for its goods and services. Time spent studying the market gives me new questions to ask about a company. Spend enough time studying a company's market, and you'll start to discover secrets about the way a market works. Those secrets will, in turn, enable you to find hidden competitive strengths (and weaknesses) at individual companies. You'll find yourself upgrading some companies because they have crucial advantages in their markets that other investors haven't yet recognized. Let me show you what I mean with two companies: Dell Computer and FDX Corp. (FDX), the holding company that owns Federal Express. Because of this homework, in fact, I'm adding FDX to Jubak's Picks. (Full Disclosure: I own shares of FDX.) I started my most recent round of research on the PC market because one afternoon Jon Markman, my colleague at Investor, asked a question that I'm sure has puzzled a lot of investors. How could Dell Computer keep growing at 60% a year when the PC industry as a whole was growing by just 15% annually? I knew the standard answer was that market leaders like Dell were taking sales away from smaller vendors. But I wondered if companies like AST Research (ASTA) had enough sales to feed Dell's appetite. Thanks to my research, I now know that Dell has a juicier target than AST to go after: the 35,000 consultants and resellers in the unbranded market. This market fact also sends me back to ask questions about Dell because I now better understand exactly how difficult Dell's task will be. Many of the companies that buy in the unbranded market rely on these consultants for advice in systems design and for support when something goes wrong. Low price, one of Dell's key advantages, doesn't guarantee a sale. <Picture> <Picture> To maintain it's 60% growth rate, Dell will have to go after the 35,000 consultants and resellers in the unbranded market. Snapshot 3-Year Chart <Picture>Recommendations <Picture>Earnings Estimates That leads me to look closely at Dell's other advantages -- what does the company have in its arsenal that would let it conquer this territory? Dell's critical weapon in the battle will be what is already perhaps the world's most sophisticated Internet supermarket -- its Web site. If Dell can improve this electronic sales tool enough, it could convince a significant share of the "no-brand" customers that they can switch to Dell without needing the hand-holding that the resellers supply. Note that Dell's competitors are going after this unbranded market by adding people -- that's one of the reasons that Compaq is buying Digital Equipment (DEC), with its vast service division. But if Dell can get a substantial share of the unbranded market through a low-cost electronic sales system, the company will easily be able to keep its profit margins well above those of the competition. I think that's an important addition to my understanding of Dell, but it's nothing compared to how this kind of analysis changed my thinking about FDX. ..........Blah...blah...blah, more on FDX. Guess someone else is trying to figure out how Dell grows 4 times faster than most box sellers. The price of oil cannot stay this depressed for too long..knew it would be short lived...the drillers will rise again! Cricket