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

To: William Harvey who wrote (63927)	9/6/1998 8:22:00 PM
From: mrknowitall	Respond to of 176387

William, it's really too late on a Sunday to get into this, but, << Dell's not losing market share. Computer sales are drying up though. How are we going to appeal to a larger market segment to sustain 30-50% per year growth? The market is looking for a company that sustains Dell's growth rate. Just the growth rate. That's why they're here in the first place. >> "Computer sales are drying up?" Again, I would ask for your source on that. "How are we [I assume, as in Dell?] going to appeal to a larger market segment to sustain 30-50% per year growth?" We're not - the same segment is not only growing, it has to replace its tools and resources every couple of years. "The market is looking . . ." as well they should be - there will always be certain high-performance companies that "sustain" or even exceed Dell's growth rate - Dell is relatively unique in a single, niche industry - computer manufacturing, but it is certainly not unique in charting fantastic growth. Gotta go - really - there's toooo much smoke out back - - - Mr. K.

To: William Harvey who wrote (63927)	9/6/1998 8:49:00 PM
From: Chuzzlewit	Respond to of 176387

William, you are taking comments out of context. So let me give you a concrete example of why book value is meaningless. Cab medallions were dirt cheap in NYC at one time (around $25 as I recall). Last I heard they were selling for around $50,000. Suppose you have a cab company which has been in business continuously since the original issue of the medallions. The value of the medallion would remain on the books at $25. The book value of $25 is totally meaningless. Dell has accomplished what no other company has been able to duplicate (although a number have tried) because Dell has created a business model that its competitors cannot migrate towards. The model is all or non in nature, and there is a significant barrier that stands between potential imitators and Dell. The barrier consists of the absolute requirement that competitors jettison intermediate channels. Simply adopting a BTO paradigm cannot possibly result in the very low inventory levels required to successfully imitate Dell. But they cannot afford to jettison their channels because of the huge loss in earnings they would suffer for at least the intermediate term. I suppose this is the business example of a "zugzwang" And that is why your bald assertion that any could copy Dell is nonsense. Many have tried and none have succeeded. Michelle Harris has discussed the complexities of duplicating the software support required for this kind of operation. JBN3 has discussed some of the finer points of manufacture. And Michael Dell has discussed the concept of "virtual integration" in a recent Harvard Business Review article. So your question "what keeps the stock up" is really quite easy to understand. It consists of the informed belief on the part of investors that Dell's growth will continue at a much faster rate than its competitors, and that the business model itself insures a strong competitive position for the foreseeable future. Another assertion you make is also incorrect. If the computer market is growing at 15% per annum, it is growing, not contracting. Additionally, new and emerging markets will be opening up in the very near future. For example, the per capita number of computers in Europe is considerably less than that of the US. China and India also represent major growth opportunities. And South America is just opening up. These markets don't simply represent situations where Dell can take customers from existing vendors so much as opportunities to sell to companies that have never used computers or whose computer utilization is considerably less than the standard for that inventory. I suppose what you are really asking is how can Dell maintain a 30% to 50% growth rate if the market is growing at only 15% per annum. Well, with a 40% growth rate these differentials could be maintained for about thirteen years maximum. I provided a derivation of the equations used to generate this conclusion some weeks ago on this thread. Obviously, Dell must eventually grow at the same rate as the overall market. But this observation is trivial. These conclusions are true for every rapidly growing company. Before you start to use book value as a basis for evaluating growth companies I think it would behoove you to understand more of the pointlessness of book value. TTFN, CTC