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

To: Ted Murphy who wrote (42544)	5/16/1998 1:00:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Precisely why is it not realistic for Dell to grow at that rate? Consider this: if the overall market is growing at an average rate of say 16% over the next five years that implies that it will be 210% of where it is now. If Dell, which currently has around 6% market share grows at 40% per annum, at the end of five years it would have a 15.4% share. That certainly seems to be in the realm of reason. The issue is not whether a computer is a commodity (which of course really says that one brand is indistinguishable from another on the basis of price and performance) -- and I would dispute that assertion, but how well the company executes. Dell's JIT manufacturing system and direct sales systems are proving to be formidable barriers not so much to entry as they are to adaptation by existing hardware manufacturers. Companies like Compaq cannot simply jettison their distribution channels for fear of losing market share. Yet the very existence of those channels compromises their need to minimize inventory risk through JIT manufacturing. That's why I see Gateway as potentially the biggest threat to Dell. I stand corrected on PEG (I was trying to conjure the figure from memory), but the major point to make here is the relative number. That is, the market is valuing other S&P500 companies at a greater multiple than DELL. I would presume that the reason is that the market is more in agreement with your view of DELL than my more bullish view. As I've repeatedly said, no valuation model seems to work for growth companies. Conceptually they fall short because they simply ignore certain key parameters. TTFN, CTC