To all: A little perspective concerning Dell's stock price-
Let's all play a little game....let's pretend that we are back on July 17, (when Dell hit 118 1/4 intraday, and the Naz hit 2028)....let's pretend that, during the two-week period that followed, Dell's stock price stayed roughly the same (between 114-118), and, in anticipation of great earnings (and a split), then ran up to a high of 129 3/8 (on August 17)...The earnings announcement was the same......Further, let's pretend that Dell's price, as it often does after good earnings reports, corrected for two-and-one half weeks down to its current level....108 1/16.............Now, had the price movement taken place in this manner...would many people be nervous about the stock? Would many people be claiming that the end is near (for the stock)....Of course not....the stock's price movements would have been (somewhat) expected, and because of this (expected) movement, we would all feel (somewhat) comfortable.
Now (remember, we are still playing the game)....what if I told you that on July 17 the Naz was at 2028, and, jumping forward to the present.....the Naz was now at its current level (1571?)....Question: (Keeping in mind the scenario listed above concerning Dell's stock price) Would you rather have Dell at 108 1/4 (and the Naz (still) at 2028, or would you prefer Dell at 108 1/4 and the Naz at 1571? Don't know about you..... I should as *%@* would take the latter!
If the Naz was currently at 2028....do you think it would rise an additional 5%, 10%...more? Wouldn't that be difficult...given the great gains over the past few years? Even the most naive investor should expect it to go down ONCE in a WHILE...
Hmmmm. (Disregarding all other information for a moment) Let's all guess how Dell would perform (based on all current information) if money flows back into the Naz during the next six months, and the Naz would rise.....let's say from 1571 to 1885... or a 20% gain...still well off its highs.......What do you think the odds are that Dell's rise would match or beat the (overall) rise of the Naz?
Now, the Naz is down 22.5% from its highs....How much further is it going to fall....I'm not sure...could fall another 5%, even 10%......but maybe it will just stay stagnant........in any case, IMO, the odds are that we are much closer to the end of the fall of the Naz, then its beginning or middle of its fall....
And, if you close your eyes for a moment and think about my example from above, it is, as if, Dell's stock was never even affected by the Naz's fall!
(The game is over-It was not entirely logical, but there is some fun in there...)
For those who are (still) concerned:
Go back to the basics...
The two (geographical) main drivers of Dell's growth are Europe and the U.S.....These regions make up 94% of their business..European corporations (and government, education, and consumers) will be buying a lot of computers in the next two years because of (1) Y2K (2) the Euro (3) undercomputerization of corporations and (4) the internet. These (4) are all givens, regardless if Europe grows at 2% or 3% or 4%. Independent studies (IDC, Dataquest, Context) and computer manufacturers (Dell, Compaq, HP) predict that huge computerization in Europe will be taking place....
In the U.S., there is absolutely no evidence that growth rates for U.S computer sales will be slowing in the immediate future...Even if we assume that growth could slow (at some point), it would be at the very low-end of the consumer market (first)....and possibly some at the high-end consumer...It would take a pretty good recession for corporations to cut-back on investing in productivity-enhancing equipment.....The Fed has their silver bullet (several, in fact)....we will not get a recession..
In Asia, Japan at some point (probably soon) will be REFLATING...that means spending money....Asia is going to be in a huge Y2K hole next year....I wonder how that will be solved by many companies? Hmmm....Japan is big-time undercomputerized..........The Chinese (and their corporations) and the Japanese can not rule the world if they do not have the basics of modern business and education warfare....the computer (I am twisting MD's word's here a lot..he never said they wanted 'to rule the world').......They (the Chinese) will buy computers in droves even if there is a revolution in China...Japan and China....These are the two big Asia markets....Not to be condescending, but all other markets (including Latin America) are pretty insignificant for Dell now, and will be for the next few quarters....
So, we are supposed to worry that the miniscule sales to Russia, Brazil, Venezuela, Malaysia, Phillipines, Sri Lanka, Paraguay, and Belize are going down the tubes....Oh please.....Go short Coca-Cola, Gilette, or even Gateway....they are going to have troubles in the next few months..(Gateway may do OK now that we are in the second half)
I am not an expert in technology, but I know enough to know that the technological changes that Gary so nicely laid out incorporate quite a few if/but scenarios and are several years off from having a significant impact on Dell's core markets....
(I am ranting and raving a bit, but) I have never heard Michael Dell as confident or bullish as two weeks ago during the conference call.
Have things changed that much?.....You figure it out!....
And that's the end of the story (for now)....
John (not Kemble, but sounding more like my idol) |
