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

To: Venkie who wrote (43832)	5/20/1998 12:00:00 PM
From: Jim Patterson	Read Replies (3) \| Respond to of 176387

Dell Computer. 44 cents. I thought I would give my rundown of the quarter. The quarter was impressive. But I have a few points I can Nit-pick at. First, the quarter was aided by one cent from a lower tax rate. Second, the buyback of 10 million shares added one more cents. That brings the number in line, but this is not really important. Is the Asian Pacific a developing problem? Growth slowed to 35% from 79% last quarter, and Japan was weaker. Despite all of the maniacal reports on Asian growth remaining firm, there was significant slowing. Unit growth was about 66%, slower than HWP's 70%. ARP/ASP was down from last quarter and year over year. The 9% Y/Y decline was the worst in five quarters. The ASP decline of 9% was slower than Rivals 27%. Resistance from the sub $1,000 market is surely a contributing factor. Option revenue of $235 MM continuous to decline both sequentially and year over year. From this it appears to me that Dell is adding fewer extras to each machine they sell. As this trend continues, DELL will find richer and richer component configuration used to maintain ASP will cause a decrease in unit growth. Let's face it, Just because you can sell a 10GB drive in a PC does not mean everyone wants one. Dell Sense that falling prices from the big 3 are a reflection of inventory liquidation is incorrect, though it is a contributing factor. Having seen new PII machines priced in the $1,100 area from CPQ and HWP, the inventory problem is forcing them to introduce new products at lower prices than desired. Because DELL is still favoring a higher end product mix they may see their unit growth slowing from its current 66% rate as Corporations realize that they no longer need the latest INTC has to offer for basic computing. With HWP showing a slightly higher Unit growth rate, could this already be happening? We all know the Risks to DELL going forward. I am impressed that the company did not hint of anything troubling on the horizon. I guess it is not a tulip bulb yet. I will add, DELL's ability to beat estimates is diminishing also. Weather this is due to large numbers or the analysts being more aggressive, DELL beat numbers by a mer 5% this quarter, the lowest in 6 quarters. This pay lower the ability to expand its PE multiple. At this point of DELL's advance, multiple expansion is necessary for the stock to move higher. Jim