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

To: Lockeon who wrote (103469)	2/21/1999 11:44:00 AM
From: Mohan Marette	Respond to of 176387

<--OT-->Lockeon: Got your second PM,glad to hear you are feeling better.<eom>

To: Lockeon who wrote (103469)	2/21/1999 11:46:00 AM
From: Lockeon	Read Replies (3) \| Respond to of 176387

An interesting read on Dell by S&P Computer Hardware/Networking Analyst. Courtesy Ichen of the TMF thread.... personalwealth.com <Snip> Friday February 19, 1999 (2:33 pm ET) Tech.Knowledge: The Dell Downdraft Why the market overreacted in punishing Dell Computer By Megan Graham-Hackett, S&P Computer Hardware/Networking Analyst NEW YORK, Feb. 19 (Standard & Poor's) - Show me another company whose stock suffers a 20% correction after it posts a nearly 50% rise in operating profits - all this while its industry peers struggle to post profits. On Tuesday of this week, that's exactly what happened to Dell Computer (DELL; S&P STARS ranking , or buy) -- it reported earnings per share for its fiscal 1999 (Jan.) fourth quarter of $0.31, up 55%. And its share price plunged from $101.8 to $81.5 in four trading days (February 11-17). Why? Dell's 38% revenue growth for the quarter fell just short of expectations. That's a cause for some concern, of course, and 38% is off somewhat from its 52% average during the prior quarters of its fiscal year. But note that this compares with industry average growth in PC unit shipments of 15% (for the fourth quarter of 1998, according to industry forecaster International Data Corp.), and comes in an environment of declining average selling prices. For many of Dell's competitors, the question is not the degree of growth in their PC profits, but whether they were profitable at all. What caused the shortfall were really two things. First, Dell disclosed that it if it had passed on more of its cost savings to customers, it would have garnered more dollar volume -- at a slightly lower gross margin -- and would have met expectations of 45%-50% revenue growth and beat First Call EPS consensus estimates by a penny. Second, the company stated that many of its corporate sales came very late in the quarter, and that its order pipeline was very strong. This means that there is nothing wrong with Dell's products or its business model; it's just that some shipments that were expected this quarter will occur next quarter, and that Dell wasn't aggressive enough in going after a sufficient number of short-term contracts to make up for these sales. Dell shareholders needn't worry. In an intensely price-competitive market, investors need to pick the producer with the lowest cost structure -- and Dell is by far the low-cost producer. Furthermore, the rapid response afforded by its consumer-direct structure gives it another advantage over its peers. And nobody else in the PC market comes close to Dell's $14 million a day in sales over the Internet (about 25% of its business is done online), where sales are extremely cost-efficient. That, combined with other efficiencies achieved under Dell's direct sales model -- lower inventories and the absence of price protection payments paid to distribution partners -- gives the company more flexibility than its peers to be more aggressive on price, and still remain the most profitable PC maker. Finally, Dell's revenue and earnings growth potential has a lot of headroom. The company has been highly successful in entering the workstation and server markets. It has also begun ramping up storage systems, which should start to have a material effect on revenues in the next few quarters. These systems carry higher price tags than PCs -- and richer margins. Most significantly, Dell's rapid-response model bodes well in these segments as the Internet has accelerated IT (Information Technology) departments' demand for servers and storage in a quick, consistent turnaround time. So I don't expect Dell's revenue growth to slip materially below a 40%-50% range over the course of the next two years. Dell's flawless record of execution does not change with its fourth quarter report. As is often the case with tech companies, if revenues are seen falling below internal expectations, they typically post a serious shortfall in margin expectations as well, as they overspend in anticipation of those sales. Dell witnessed stronger margins in the fourth quarter, it grew shipments at 3.5 times the rate of its peers, and it gained market share. It remains the fastest growing, most profitable PC maker. If this is how Dell "misses," I'll take it. <snip> Don't see too many problems here - <BG>... Have a GOOD weekend everyone...