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

To: Phillip C. Lee who wrote (15855)	7/21/1998 10:45:00 AM
From: soup	Respond to of 213177

OT(?) Dell Valuation. Cribbed from Yahoo! AAPL RodgerRafter Jul 20 1998 7:46PM EDT >They gave Michael Dell a standing ovation at the shareholder's meeting last Friday. The stock has risen 2600% in the last 3 years. Someday Dell is going to give back all those gains. CEO Dell is a master of spin, hype and illusion. He drew cheers when he announced that the Dell online store was selling $6 million per day. However, he's counting phone orders as "on-line" orders. He also got cheers for predicting that overseas revenues would be up over $6 billion from $4.3 billion. Even if he's right (he isn't half way through the year yet) 40% would be a huge drop off from past revenue growth, in the region that is supposed to be providing their best growth. Suspiciously, nothing was mentioned about US growth prospects. With IBM's hardware sales down 12.7% in Q2, (PC sales getting most of the blame), and CPQ product sales down slightly, it seems Dell could have a lot to hide. It's hard to see Dell meeting this quarter's earnings estimates of 46 cents per share, which would be a projected 58% rise over last year. Nevertheless, they've got a few tricks that should hold up their share price. For one thing, the shareholders just increased the number of shares outstanding, so we can expect a split announcement with the earnigs, just as they did in February. Additionally, they can always cut costs like R&D spending or buy back an unlimited amount of shares to make EPS come out the way they want. 2 quarters ago, a surprise (unpublicized) drop in R&D spending (which was already the lowest in the industry by far) miraculously turned an earnings disappointment into an postive surprise. Profits are largely suspect because of the large amount of dilution caused by Dell's employee stock option grants (just about the largest around). They've also been shamelessly buying back stock, and I've watched in amazement as Price to Book has gone from 20 all the way up to 52 in the past 9 months. Instead of investing their profits in new plants and equipment to increase production, Dell now contracts out much of their production which hurts margins, quality control and the efficiency of their direct margins. Instead of developing new products or expanding through acquistions, Dell continues to just dilute/repurchase themselves until there isn't any book value left. Someday, the market is going to figure out that there just isn't any lasting substance left to Dell. It's all marketing, hype and accounting trickery. Until then, I'm staying out of the way. I already lost too much on Dell shorts back at the start of this year. Dell, IBM, that's two down. I'll bash Compaq when I get some more time. Until then... Go AAPL. Rodg.<

To: Phillip C. Lee who wrote (15855)	7/21/1998 10:49:00 AM
From: soup	Read Replies (1) \| Respond to of 213177

OT(?) IBM Earnings. cribbed from Yahoo! AAPL RodgerRafter Jul 20 1998 6:19PM EDT >IBM beat First Call estimates by a penny after the close today, and beat the Zach's average by 3 cents. I suppose the market will think this is good news and rally somewhat tomorrow. For that I am grateful. EPS for the quarter was $1.50, up from $1.43 in 2Q '97 and about 1.06 last quarter. However, revenues were down 0.3%. Net earnings were only up 0.4%, despite the second sentence in their report "Second-quarter 1998 net earnings totaled $1.5 billion compared with $1.4 billion in the second quarter of last year." That statement gives me a great deal of amusement. They rounded $1.452 billion up to $1.5 for Q1, and $1.446 billion down to $1.4, thus making a $6 million dollar increase sound like a $100 million dollar increase. So how did they beat the estimates? They bought back $1.7 Billion dollars worth of stock last quarter, causing net shares outstanding to decrease. This allowed flat earnings to go farther for each share, creating an illusion of earnings growth, at the expense of equity, which has dropped $1.24 Billion over the last two quarters. Nevertheless, analysts love to see stock buybacks and EPS growth. They don't give a damn about book value. Fortunately, Apple has much more long term sense than IBM. What would have happened if Apple had taken their $101 million in earnings last quarter and bought back stock? Well, given the extremely high short interest, and tight supply of stock, it probably would have caused a significant rise in the share price. They'd have paid about an average of about $34 per share for about 3 million shares. EPS then would have been boosted by about about 2% (who needs that when you are already beating estimates by 50%). Fortunately Apple doesn't need to sacrifice long term growth to create the illusion of short term gains in EPS or a rise in stock price. Perhaps this is because our CEO doesn't own any stock? Go AAPL. (in the long run) Rodg.<