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

To: Key West who wrote (95900)	2/8/1999 9:56:00 AM
From: Gabriel008	Read Replies (1) \| Respond to of 176387

Gene, I am taking the liberty of posting your analysis of DELL [on the Compaq thread] over here so that everyone can truly understand the potential for this fabulous company. BTW, a wonderful synopsis of DELL and what's to come. Message 7711229 To: +Steve Schroeder (47272 ) From: +gene piccoli Monday, Feb 8 1999 3:14AM ET Reply # of 47332 Steve, No question one of the reasons Dell's stock has done so well is Michael Dell's mastery of the direct distribution model and ability to avoid any major mistakes. Your question re what the future holds, however, is an excellent one. That, in fact, is becoming increasingly the question on WS's mind as Dell's stock continues to outperform the sector and the whole Nasdaq. There is a reason why some Internet stocks trade at ridiculously high valuation models, not that I agree or allow myself to buy any of these issues. Regardless of how much "conventional wisdom" could debate these stratospheric valuations, the market continues to be willing to drive these things higher. So what is really happening here? Consider this; it is expected by 2001, one billion people will be hooked on to the internet, roughly 1/4 of the planet. Never in the history of capitalism has the world ever seen a product grow so quickly with such absolute penetration. Yet, we are only about 300,000,000 units into this 1 billion+ market. So the potential growth for hardware, software, and connectivity remains huge. So where does this leave Compaq and Dell? In a great position, not unlike Cisco, Lucent, Microsoft, or Intel. Buy all these, put them away, and you will make 25%+ on your investment per year indefinitely. Compaq vs Dell? That another question. Firstly, as Gabriel's earlier post today shows, Dell has by far any away the best growth rate of the sector. I believe today's European numbers saw 60%+ growth in Europe, vs Compaq's 17% or so. This has been pretty well the case in all of Dell's markets. The main reason for this spectacular growth is that Dell only has about an 8% global marketshare vs Compaq's 28%. Any first year economics student will confirm to you that a 50%+ sequential growth rate is still likely for many quarters to come, perhaps even years, given the small global market share and incredible size of the market. That is why, Steve, Dell has a market cap of $128 billion. It is growing at 50%+, and can reasonably be expected to continue this pace for a while longer. Also, consider that all of the problems plaguing the tech industry such as declining component prices, or inventories, hardly affect Dell. Compaq is always accused of channel stuffing, Intel is always at the center of price wars, and Microsoft is always fighting off the Anti-Trust lobby. Despite these obstacles, all three have been great stock to own. Yet Dell suffers from none of these problems.They could care less about falling DRAM prices. With 3-6 day inventory, no dealers to placate, make-to-order model, $10 million a day in internet orders, Dell just continues to feed this exploding market efficiently and brilliantly. That is why, Steve, that Dell continues to defy conventional wisdom logic, and why its investors will continue to pay higher valuations. Gene Piccoli

To: Key West who wrote (95900)	2/12/1999 12:45:00 PM
From: Gabriel008	Read Replies (5) \| Respond to of 176387

Gene, given that DELL's expectations have been now reduced to only meeting the consensus estimate of $0.31 I decided to redo my DELL analysis for Q4. Here's what I have; DESKTOPS: Q4 - 1815k units vs 1583k in Q3 - 15.3% sequential growth PORTABLES: Q4 - 406k units vs 352k in Q3 - 14.7% sequential growth SERVERS: Q4 - 69184 units vs 64348 in Q3 - 7.5% sequential growth This data is purchased from IDC who have shown extreme accuracy in their data. The server business is my only concern with 7.5% sequential growth [63%yoy growth] and, if these analysts are correct, may be the reason DELL experiences a lower ASP in this quarter [the servers insufficient growth in relation to the other categories]. Based on this I reduced my ASP from $2400 to $2364 - the same ASP the analysts used. This generates total revenue of $5.416 billionfor Q4. I'm keeping gross profit at 22.54% - the same as Q3. If margins on desktops were lower in Q4 I believe this was probably offset by the higher margins in portables, servers and data storage. I increased Operating Expenses by $53 million to $600 million in keeping with the trend from previous quarters. Income before tax came to $631 million and based on a tax rate of 30% generated Income after tax of $442 million. Based on average weighted shares of 1.371 million [a 10 million reduction from Q3]EPS comes in at $0.32. But hold on, this does not include Data Storage. Let's add in the $300 million in incremental Data Storage for Q4 [IDC reported a total incremental external Data Storage volume of $300 million for Q3 and Q4 combined. However, DELL did not start selling external Data Storage until late in Q3 and January 1999 was not included in the $300 million.Therefore, I'm assuming, at worst, $300 million.] Applying the same net income after tax percentage as the regular PC business we generate an additional $0.018 in eps. This brings the toal EPS to $0.34. I'm sticking with this number - $0.34 - although we could see an EPS as high as $0.36 for Q4 [based on a different way of adding in the Data Storage to the overall business]. I'm confident that DELL's earnings will now surprise the street and we should see a nice spike up on Wednesday morning. Regards, Gabriel