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

To: Jim Patterson who wrote (37986)	4/15/1998 4:33:00 PM
From: James Fink	Read Replies (3) \| Respond to of 176387

According to the following article, Micron Electronics (ticker=MUEI) has hired Joel Kocher, a high-ranking DELL executive, to copy DELL's BTO system. If so, DELL is going to suffer intense competitive pressures! See below: The Lunchtime News Apr 15, 1998 FOOL PLATE SPECIAL An Investment Opinion by Dale Wettlaufer Micron Electronics' Gambit Pop question: Which maker of PCs and servers has enjoyed the best shareholder return since the beginning of 1998? Besides Apple Computer (Nasdaq:AAPL - news) , which is up 104% year-to-date, and quick-turn mogul Dell Computer (Nasdaq:DELL - news) , which has gained 65% year-to-date, Micron Electronics (Nasdaq:MUEI - news) is up 51%. The Nampa, Idaho company, a subsidiary of chip maker Micron Technology (NYSE:MU - news) , has made numerous strategic moves in 1998 that investors believe will start to pay off later this year and into 1999. In late February, the company completed the sale of 90% of its interest in its contract electronics manufacturing unit, MCMS Inc., for $249 million in cash. While that will make revenue and earnings comparisons that much tougher going forward, it could take some of the cyclicality out of the company's results. Not that contract manufacturing had been to blame for that in recent quarters. The company's misguided idea of what the "direct channel" was all about contributed greatly to heavy inventory write-offs in the second quarter. The direct channel works when a company can perfectly forecast demand or if it can convert raw materials into finished goods that can be shipped very quickly. Micron operated more on the former principle and got burned last quarter. While the company didn't break out its write-offs, one can work through what gross profit should have been and compare that with the actual negative PC systems gross profit to get an estimate of a $50 million+ write-off. During the second quarter, the company brought in a new president to work on these problems. Joel Kocher is a veteran of Dell Computer, so he is quite familiar with the philosophy of turning inventory and not just stocking inventory for quick shipping. Before Steve Jobs killed the Apple clone market and bought back Power Computing's OS license, Kocher had successfully built Power Computing into a pretty scrappy vendor of PCs. With lots of unrealized bottom-line potential at Micron Electronics, the market has spotted the company a higher share price in anticipation of converting on that potential. Should the company be able to grow its earnings at the same growth rate as the overall PC and server market over the next 12 months (a la Dell's market share-grabbing formula), EPS over $1 per share looks possible, although the the mean estimate for fiscal 1999, ending in August 1999, stands at $0.73 per share. The downward revision of only 2 estimates in 10 took the mean EPS down from $0.92 to $0.73, though, so there's a divergence of opinion there. Whether or not Kocher can turn things around, the company will be interesting to watch over the next 12 months, as Micron Electronics really has the only shot among larger business PC vendors of replicating the Dell direct sales model.