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

To: freeus who wrote (35887)	3/27/1998 4:32:00 PM
From: Sonki	Read Replies (2) \| Respond to of 176388

Dell Is the Clearest Buy: Dell claims that it has been unscathed so far in the price battle that's bleeding Compaq and HP. And indeed, it stands to reason that a company that builds to order and sells directly would be insulated from inventory-related problems. Compared with other PC vendors, who turn their inventories over maybe 10 to 12 times a year (not counting their distributors' own inventory delays), Dell turns its inventory more than 30 times. In addition, Dell mainly serves corporate technology buyers, who are less sensitive to price and more concerned with performance. (That's one reason Dell's average sales price is $500 more than Compaq's.) Even so, says T. Rowe Price's Morris: "It would be fantasy to think that Dell can totally escape the industry's pricing pressures." Dell has several options to maintain profits when the squeeze hits. For starters, it is aiming to take more custom orders over the Internet, a sales channel that is particularly popular with consumers and small-business owners, two kinds of customers Dell is keen to win over. Internet sales currently run more than $4 million a day, and Dell hopes to increase that figure to half the company's revenues (which were $12 billion last year) over the next few years. The company is also working hard to sell more servers. Goldman Sachs' Schutte estimates that if servers made up as large a proportion of sales for Dell as they do for Compaq, Dell's overall operating profit per unit would shoot up from $275 to $400, a full 47% higher than Compaq's operating profit. Server sales more than doubled for Dell last year. All indications are that Dell is doing fine; yet some of the industry's uncertainty has crept into the stock recently, taking the price from its high of $70 to a recent $63. DMG's Kwatinetz thinks Dell can keep earnings chugging along at a 30% annual pace or better through the end of the millennium. However, with the P/E at a lofty 34, the stock is likely to be susceptible to turbulence in the rest of the industry. If you have a chance to buy Dell at a lower price in the next few weeks, do so. Anything in the 50s is a steal.