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

To: Mohan Marette who wrote (98847)	2/13/1999 5:09:00 PM
From: Jock Hutchinson	Read Replies (2) \| Respond to of 176387

Mr response: DELL for a long time was the unchallenged leader of the Internet. Now CPQ has stepped up the competition in a market where products are much more fungible than you may wish to acknowledge. Incrementally, it will be much more difficult for DELL to grow its business. The easy part of its Internet growth has already occurred. You don't know where I ran into rising interest rates? How about yesterday. The interest rate on the long bond surged. Some of my fellow traders in Chicago literally made millions yesterday on the rise in interest rates. Indreased cyclicality? You are right. Dell is not immune to cyclicality in its business. Because of its superior strategy, it has been able to overcome any near term cyclical problems. But in an increasingly mature market, that will be more difficult. Y2K? Yes, people who were thinking about replacing their machines a year or two from now are now pushing their plans ahead so as to avoid any Y2K problems--which is precisely my point. After every business has purchased a box to overcome the impending Y2K "doom", who will be left to buy in 4Q and as early as 3Q '99? That is called cyclicality, and it is right around the corner. DRAM prices as a function of demand? Surely you must be kidding. DRAM prices have been a function almost exclusively of supply for the past four years--or to be more specific oversupply. With the SEA crisis and diminished investment in Fabs, it is clear that this condition is ameliorating itself and that DRAM prices will once again rise--perhaps significantly. And an increase in DRAM (and other components) means lower margins for DELL. New Product Introduction? My only point is that it will be very difficult for DELL to break into the storage market, and that it will require DELL to make extra expenditures to the detriment of the bottom line. Your entry level price? I have no doubt that you have made a ton of money on DELL by being utterly contumascious. However, if DELL moves from a high of 110 to a more realistic price in the 70s 60s or even lower, than you have lost over 40 percent of the profit that you could have had. Yes, I know that there is a tendency to view a significant decline in DELL's stock as playing with the house's money, and as a consequence, you will tough out the first decline this stock has seen (as a result of its own circumstances) in almost five years. But if and when DELL hits the 70s or 60s, it will have not moved one iota for the past six months, which is an excellent signal to the hot money (including fund managers trying to play catchup) to exit stage left. When that happens, it gets to like musical chairs, and the seating gets sparse real quick on the deck of the Titanic with a forward PE of over fifty and a forward growth rate in revenues of ten to fifteen percent. I don't recognize their superior business strategy? You must be kidding. Michael Dell is like a God. Unfortunately his company's stock is priced as if Mike Dell is the one and only God. Simply put, Dell's growth does not sustain today's PE.