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

To: Ed Zhao who wrote (43320)	5/19/1998 4:08:00 PM
From: Chuzzlewit	Respond to of 176387

Ed, I respectfully disagree with your conclusion: But SONY should have higher absolute value (total market cap), since a company is a mature industry has much less risk of being defeated by the competitors ... This is totally incorrect. The mature industry with the presumed lower risk (and I don't know that that is true for SONY -- I'll just accept your assertion for the moment) is reflected in two ways: a lower beta and a lower implied risk-adjusted discount rate (the risk-free rate of return plus a risk premium). It follows that SONY's anticipated free cash flows are already discounted at a significantly lower rate than Dell's, and the market cap reflects that. Your point about "spits out cash" is well taken, in the sense that DELL does not dividend directly -- it uses share buy-backs as a surrogate. I should have used a better choice of words. That's why I used a zero-coupon bond as the analogy. TTFN, CTC