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To: freeus who wrote (2691)	5/28/1998 3:02:00 PM
From: ALTERN8	Read Replies (1) \| Respond to of 21876

DELL may be good but for how long? take a look at this: "1QFY'99 Results Strong, But Not Good Enough To Keep Our BUY Rating" Research Notes Subject: Dell Computer Corporation (DELL--$94.59375)--OTC Opinion: HOLD ============= Prior: BUY =============================================================================== Date: May 20, 1998 ------------------------------------------------------------------------------- Market Profile 52-Week Range $99-$23 \| EPS Growth Rate (3-5 Yrs.) 32% Avg. Daily Volume 13,271 M \| ROAE (LTM) 74% Shares Outstanding 700.0 MM \| Debt to Total Capital 26% Market Capitalization $66,216 MM \| Book Value Per Share $2.03 Floating Market Cap. $61,581 MM \| Indicated Dividend/Yield None Institutional Owner. 73% \| Revenue (LTM) $13,659 MM Insider Holdings 7% \| _______________________________________________________________________________ Earnings/Share Fiscal Calendar Calendar 1Q/Apr 2Q/Jul 3Q/Oct 4Q/Jan Year Year P/E Ratio ------ ------ ------ ------ ------ --------- --------- 1998 $0.27 $0.29 $0.34 $0.38 $1.28 $1.25 75.7x Current: 1999E 0.44A 0.46 0.50 0.55 1.95 1.90 49.8 Prior: 1.87 2000E - - - - 2.75 2.70 35.0 ------------------------------------------------------------------------------- Highlights: - We are lowering our rating from Buy to Hold for price reasons even though we are adjusting our EPS upwards. Management has executed very well and still enjoys an economically advantaged business model. However, from current levels, the company has to hit on all cylinders for the stock price to continue the strong double-digit increase over the next 12 months, which we are unwillingly to assess ------------------------------------------------------------------------------- 1QFY'99 was a very strong quarter, especially compared with the turmoil at its major indirect PC competitors. Dell gained market share in all geographic areas and in all product lines; all are profitable. It is now #1 in profits, #2 in WW revenues, #3 in units among PC companies. A 50% revenue growth year is in sight for FY'99. 1QFY'99 revenues were a little light due to lower ASP but gross margin improved 0.3% Q/Q because of component cost decline and a richer mix of servers/workstations/notebooks. Looking forward to the fiscal 2000/2001, some of the extreme advantages of the Dell business model could diminish, as component costs decline in a more normal fashion or possibly firm as DRAM prices could benefit from a looming shortage in calendar 2000. As Dell becomes the number two desktop PC for corporations and closing on the number one spot, any meaningful shift to the sub $1,000 PC could slow revenue growth. Finally, as a $12 billion company, Dell probably cannot sustain growth rate of 50% over the next two years. Current valuation of P/E of 35 times our fiscal 2000 EPS estimate would only be cheap if Dell can grow 40% to 45% next two years, which we are presently unwillingly to assume. ===============================================================================

To: freeus who wrote (2691)	5/28/1998 9:10:00 PM
From: Ibexx	Read Replies (1) \| Respond to of 21876

Dell is lacking in a long-term strategy; prospects are cloudy beyond a couple of years. CPQ, on the other hand, pays for the future with its present. Ibexx