Ref:Dell's portal ambitions? and 'dellaution.com'-Ohmigod this is Huge....
Jim:
First of all thank you again for posting the the SmartMoney URL for the Dell article. Going by David's (David Jung) post about 'dellaution.com' it seems as though there is more to this story than mere speculation. If true this will be huge news and who know where the stock will end up.Man,this is all quite exciting,whether there is anything there or not but we shall so find out I hope.
Well actually we (Sig,freeus and myself i believe) got an email from a Mr.JP who was raising the same questions,I don't know whether he is a member of Si or not,could have been a lurker.
Now allow me to copy and paste the article for those who hasn't seen it yet and I will highlight the parts I liked best.
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February 5, 1999
Could Dell Join the Portal Wars?
By Joshua Albertson
DELL COMPUTER
DELL COMPUTER (DELL) hosted 1.6 million unique visitors at its Web site in December, according to the Internet tracking firm Media Metrix. It did not sell one Beanie Baby, PalmPilot or Oprah-recommended book. It sold (and sells) Dell computers and the equipment and services that run on top and alongside those machines. "I think that Dell has, more so than any company I know, stuck to its knitting," says Robert Anastasi, who covers a number of technology stocks for Robinson-Humphrey.
That focused strategy has kept Dell on top of the PC sector, where its competitors have struggled mightily to keep up. Industry analysts still talk about Dell's direct-business model with reverence, and investors still reward the stock with a multiple well beyond that of its peers. Even with the recent Nasdaq pullback, its shares trade at 68 times next year's earnings estimates.
But as Dell's competitors regain their footing and the Internet moves from a sideshow to an economic tour de force, does it make sense for Dell to do more online? After all, Media Metrix ranks Dell.com as the 16th-most-trafficked commerce site on the Web. And none of the 15 addresses ahead of Dell restrict their sales to a single brand. Why shouldn't Dell benefit from the Amazon.com (AMZN) boom? Couldn't Dell.com compete with Yahoo! (YHOO)?
The company is not ready to reveal any sort of Internet-diversification program, but a spokesman allows that there is talk in Round Rock of leveraging Dell's Web presence.
"We're definitely thinking about that, but we don't have an announcement at this time," says David Dix, Dell's global Internet public relations manager, adding that future online efforts would not stray too far from the company's winning formula. "You can probably guess that we won't be selling any Mariah Carey CDs anytime soon."
So far, Dell has branched out in cyberspace by partnering with a variety of Internet service providers (ISPs) and mass-market portals. In September, the company initiated a program called ConnectDirect, which allows Dell customers to access the Internet immediately and to personalize their start pages. AT&T (T) and GTE (GTE) signed on to provide standard Internet connections; Excite (XCIT) contributes the search and portal capabilities; and Bell Atlantic (BEL), US West (USW) and SBC Communications (SBC) offer high-speed access. Dell also recently inked a deal to preload America Online (AOL) software in some of its machines.
Dell has recognized that its customers, especially its smaller customers, buy machines to get onto the Web. But clearly, the focus is still on corporate hardware sales. And, at least in the near term, analysts believe that alliances will be enough to sustain consumers' Internet thirst without compromising Dell's streamlined operations.
"I think that [companies like Dell] will start to leverage the traffic they are getting," says David Kerley, an analyst with Jupiter Communications. "However, I don't think they are going to put at risk the relationships they are developing with portals and ISPs."
Meanwhile, Dell rival Compaq Computer (CPQ) has introduced a flurry of Internet initiatives in recent weeks. First, the company announced that it would mimic Dell's sales model by selling boxes directly to customers through the telephone and Internet. Then, the company joined the broader e-commerce fray by announcing plans to acquire Shopping.com (IBUY), an Internet-based flea market of sorts. Next came the revelation that Compaq would spin off a portion of its portal site, AltaVista, in order to compete more effectively with the likes of Yahoo and Excite. Finally, the company said last week that it had formed a new business unit, Compaq.com, to sell Compaq products and services to customers over the Web.
Compaq says that its enhanced Internet presence is helping it cut into Dell's sales, and the Compaq.com move should help fortify the company's corporate presence, but analysts don't see much reason for Dell to follow Compaq beyond the bounds of PC-related sales.
"You can always use your traffic to sell something else," says a skeptical David Wu of ABN Amro. "But just because you have a portal doesn't mean that people are going to buy more."
Adds Lou Mazzucchelli of Gerard, Klauer, Mattison, "They get their strength from focus. And the fact of the matter is that they have some advantages moving PC hardware through the Internet that they wouldn't have with other products."
And, unlike Compaq, Dell continues to appeal mostly to big-ticket corporate buyers for whom Shopping.com and AltaVista don't count for much. It might make sense for Dell to expand its online technology offerings in the near future, but don't look for the all-encompassing Dell portal anytime soon.
Is Growth Slowing?
Back in the world of hardware sales, Ashok Kumar of Piper Jaffray has again caused a message-board stir, suggesting, ahead of the company's Feb. 16 earnings report, that Dell is not growing as fast as its competitors. Measured by sequential unit growth, Kumar says, Dell is lagging its peers for the second straight calendar-year quarter. He says Dell's worldwide market share dropped from 9.2% in the third quarter to 8.5% in the fourth quarter.
Kumar's analysis runs counter to those recently offered by research firms IDC and Dataquest. IDC figures, which are presented in a year-over-year format, show Dell's shipments growing at 56% for the quarter. Compaq registered 17% growth and IBM (IBM), 14%.
And other equity analysts don't seem as concerned as Kumar. "I would tend to believe the IDC figures that suggest that their revenue looks pretty good," says Mazzucchelli.
Dell stock is down 7% over the last two days, amid concerns over chip-price wars and widespread technology-stock dumping. But shares are still up more than 30% in 1999. Even Kumar, who maintains a Buy rating on the stock, admits that it's not hard to justify owning Dell.
"[Money managers] are at odds, because if they take their money out of Dell, where do they put it?" he explains. Still, he thinks investors should remember that Dell's success is based on execution and not on a proprietary product. Such a model, he says, requires slightly more skepticism than Dell buyers are exhibiting.
All the more reason, perhaps, to leverage the model and diversify the product mix.
(Courtesy: SamrtMoney via James Nickel)
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