Ken: Since you woke me up, here is a bit of Sunday reading.(long post!).(ggg)
Return now to the thrilling days of yesterDell, beginning with the price war of 1896( Errr, 1996)
(it takes a while for the 'click-here' song to load, but you get the whole works , and on the 2nd
try it will begin immediately)
cedarnet.org
Here is what Michael Dells response to a price war has been in the the past....(ggg)
Note: The price of Dell proceeded ever upwards during the war from 40 to 56 to to 64 to 80 to 96
to 120 in Dec 1996. And today would be $536 excluding splits.
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CHAPTER 1. The Price War of 1996( or nothing new,from www,dell.com news)
New York, N.Y., April 9, 1996 --The chairman and chief executive officer of Dell Computer Corporation (Nasdaq: DELL) told securities analysts gathered here today that the company's sales to corporate customers remain strong and reports of "price wars" are exaggerated since prices for computer systems are not coming down faster than component costs.
Michael S. Dell, chairman and chief executive officer of the world's leading direct marketer of computer systems, said there have been dramatic reductions recently in component costs such as
memory. For example, prices for memory, which represents up to one-fourth the overall cost of a computer system, have fallen in some cases by as much as 50 percent over the past few months.
AUSTIN, TX, May 14, 1996 -- Dell Computer Corporation (Nasdaq:DELL), the world's leading direct marketer of computer systems, today reported record-breaking results for its first fiscal
quarter ended April 28, 1996. Revenues rose to $1.64 billion, an increase of 44 percent from the first quarter last year, while net income rose to $82 million, up 33 percent from the year-ago quarter.
Primary earnings per share were $0.84, versus $0.55 in the same period last year.
Austin, TX., July 2, 1996 -- Dell Computer Corporation surpassed IBM and HP last year in desktop sales to the US corporate market to become the second largest PC manufacturer to Corporate America, according to research performed by International Data Corp. * (IDC). With 13
percent marketshare among US medium and large businesses, Dell is now ranked second only to Compaq in sales to the corporate PC market. - Proving once again that great performance and reliability needn't carry a premium price, Dell Computer Corp.
(Nasdaq:DELL), the world's leading direct marketer of computer systems, today announced price cuts in the U.S. of 22 percent to 41 percent across its entire line of Pentiumr-based PowerEdger network servers.
October 1996
-- Dell Computer Corporation (Nasdaq: DELL), the world's
leading direct marketer of computer systems, today announced that it has cut prices by up to 12 percent in the U.S. across its line of network-ready Dellr OptiPlexr corporate desktop PCs. This move marks the second price cut in as many months on Dell's OptiPlex PCs. Dell cut prices last month by up to 16 percent on certain models of the Dell OptiPlex line and prices on some OptiPlex systems have dropped as much as 56 percent since January.
(Nasdaq: DELL) has authorized a two-for-one stock split payable in the form of a 100 percent
stock dividend to be issued on December 6, 1996, to stockholders of record as of November 25,1996.
This is Dell's third stock split in the last five years. At the end of its most recent fiscal quarter, which ended October 27, 1996, Dell had 94 million shares issued of which 6 million were held by the
company as treasury shares.
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CHAPTER 2 Bearish sentiments during the price war
Friday, Sep 20 1996 6:57PM ET
This stock is rediculous. The fund managers could hardly keep a straight face last week when someone called CNBC and asked what his outlook was. He said to sell half to buy more when it made a correction. I believe that this is a great company...but this is
crazy....I wouldn't buy it now, that's for sure.
Tuesday, Sep 24 1996 12:59PM ET
DELL Downgraded by Bear Stearns to attractive from buy. Released via DJ at 9:15 this morning. Price down $2.00 to $83.00.
Wednesday, Sep 25 1996 1:04PM ET
Take profits now and re-but at $70.00. TC2000 (Worden Brothers) showed that the Balance of Power and Money Stream was extremely negative the past few weeks even though DELL was hitting new highs. Profit taking off the upside blow-out.Earnings are expected
to be $1 in a traditionally strong quarter. So say we end
up with $3.50 for the year we have an 18-20 p/e on an extremely mature co. with a 31% market share (I think anyway). Where can they grow?
What will drive earnings? What happens on Nov 13 when the FED meets and Bill is safely reelected?
CPQ and DELL, amongst others, are fully (if not over) valued. A short position may hurt for a while but I look at it as an opportunity to short more. I did DELL at 84, 85 ews. The business model gets hurt when spot prices for memory go up 50% in 1 week ($8 to $12). Either prices need to rise or margins suffer.
The momentum players ran this one up too fast, and it will probably settle out in the low 70's before its next advance.
Good Luck to all.
Ok guys. I sold Dell today at 85 after the downgrade by some analyst. Although a nice profit, I hated to do it. It has been a strong performer in my portfolio this year. I must admit, I missed a good portion of the up move by going in and out of Dell this year.
Tuesday, Oct 15 1996
DELL looks like it made a massive triple top formation today. I admit that I am on the bearish side (with puts).
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CHAPTER 3. A timely prediction (Dell declared a 2/1 split in Nov) To: Peter Shaw (254 )
From: Patrick E.McDaniel Saturday, Sep 28 1996 12:08PM ET
A history lesson on Dell's 2 for 1 stock split of last year.
October 9,1995 Dell announces 2 for 1 split effective October 27,1995 for
shareholders of record on October 20,1995.
Why do I point this out?
Dell has been pretty reliable as far as getting announcements out in a consistent timeline.
If Dell were to announce a 2 for 1 split for this quarter and be as reliable on their
announement dates the following would take place:
October 7,1996 Dell announces 2 for 1 split effective October 25,1996 for
shareholders of record on October 18,1996.
Note:I have no idea if Dell will announce a spit.I do think there would be great bragging
rights to split one year after a split.Also keep in mind Michael Dell owns a ton of Dell
stock and has a strong incentive to get peak performance for the shareholders.
October 7th may be a bad day for the shorts!
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CHAPTER 4 Words by a famous Bull
Thurday Oct 10,1996( by Wayne Liam)
I am a long term investor and have hold Dell more than 3 years now. It has rewarded me very well: it is a 9 bagger. When I see people trading in and out of a stock, I always wonder how large the gain they try to achieve each time. If it is 30%, how many trades do they need to add up to a 9 bagger? Not to mention the capital gains tax they have to pay.
Dell is probably a little bit ahead of it self right now. But I am not going to sell. Their last quarterly result is about $1 per sh. I think they have a good chance to double that in three years.
Then they will make $8 per sh(per year) and the stock will double accordingly to $150--$180. Trading might let you avoid a temporary drop but you might miss the next big run up because nobody knows when it will come.
I am holding to Dell because of its rare asset: CEO Michael Dell. No body knows the PC business better than Michael Dell, except Chairman Bill Gates. The sucess of a high tech company relies on: management, management, and management.
Yesterday Dell announced the news of hiring a Compaq VP for its Server product line. I think that is a wonderful move. They are going to squeese the profit away from CPQ. Dell had a small server business. By moving into it, they might be able to substantially increase their profit margin. Whereas CPQ had huge profit from server, those profits had topped and the only way to go is down. PC companies used to be valued at a discount from other high tech companies when measured by PE. But I think PC business has come to a turning point that such a discount is unjustified. This turning point is marked by the shake out of the last two years through major PC price reductions among the competitors. Now the cards are dealt, and we have winners and losers. Clear winner is Dell, which not only is gaining market share but at the same time saw its profit rising by 50%.
Compaq survived but its earning stagnated. There are many losers and blood is running: AST, DEC, APPLE, IBM and I doutb HP is making money on PCs. Hence Dell is a winner and it will command a premium.
And I am also not concerned on Japanese enterance in the desktop. The PC business requires rapid introduction of new models and I am not aware of any Japanese advantages on this. They are good at mass production though. They might pose a threat on the notebooks.
Other things to like in Dell's business model is build to order. The PC is fresh out the factory with every component built using the latest technologies. Whereas CPQ and the likes that sell through reseller have their PC's several months old due to inventory stocks. And several months is a long time in this fast pacing business.
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CHAPTER 5. Dells final comments
NEW YORK, Sept 20 1996 (Reuter) - Dell Computer Corp said on Friday it did not know why its stocks was up strongly in active trade.
"There is no reason that we can see. There is no news. We're all just sitting here watching it go up," said Lisa Pearson, a spokeswoman for Dell. The stock was up 4-1/8 at 87-1/4 amid a general rally by PC makers.
Walter Winnitzki, who covers the stock for Dillon Reed, said there was no specific piece of news that could account for the move in Dell.
"The whole group is up. While there is no news specific for today, it all boils down to the fact that fundamental trends are very positive for Dell," he said.
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