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

To: Calvin who wrote (103831)	2/22/1999 3:32:00 PM
From: SecularBull	Read Replies (1) \| Respond to of 176387

Aren't they always on days like this? <GGG> LoD

To: Calvin who wrote (103831)	2/23/1999 8:48:00 AM
From: Calvin	Read Replies (1) \| Respond to of 176387

From the Dell Weekly Newsletter: ------------------------------------------------------------------- DELL'S ANNOUNCEMENT BRINGS DOWN THE NASDAQ If you own Dell shares or owned shares in a stock market (from Paris to Hong Kong), chances are that the value of your portfolio dipped on Dell's earnings announcement. Indeed, the day after Dell announced record earnings and revenues, the stock dropped nearly 20% and the NASDAQ suffered its single largest ever drop! Why? Read on... The primary culprit, of course, is expectations: Dell posted quarterly profits in line with expectations but saw its torrid pace of revenue growth slacken somewhat, sending its stock tumbling late the next day. Revenues rose 38 percent to $5.2 billion but that pace has slowed compared to the 50% plus growth that we had experienced over the last few quarters. With the recent rise in stock market valuations (Dell included), it is only normal that stocks readjust to match forecasted growth over the coming years. This is a healthy market phenomenon. That leads to some justified conclusions: Dell's revenue (as most of you already know) is largely dependent on sales to large corporate accounts (80% of our revenue are to Fortune 500 companies) and only 8% of our revenues comes from the consumer market. By contrast, the fourth quarter's seasonality (Christmas holidays) is largely due to the consumer market. Analysts contend that Dell "missed the boat" on the fastest growing PC segment: the sub-1000$ PC. Dell originally had decided not to enter that segment, refusing to subsidize this money-losing market with our corporate sales. But this segment turned profitable for the first time in its history during the fourth quarter (component cost declines would actually help us build a "worthy" consumer product at margins that are sustainable). Dell's chairman acknowledged that we were a bit slow to react and vowed to enter this market with the same force and focus that we have shown in the other segments. But it also leads to some not-so-justified conclusions: The PC market grew at 11% this quarter, and as such, Dell grew 3.5 times faster than the industry. But some analysts concluded that the PC industry had become extremely competitive (as if that was any news) and that as a result, Dell had lost some share to its competitors - notably IBM and Compaq. This is particularly interesting... -At first glance, Compaq's revenue growth for the quarter came in at 35% (the best they have had in the last 2 years). But as analysts have suggested, if you take away the Digital acquisition - the net revenue growth for their PC business is roughly 2%. Since we grew revenues at 19 times their rate... it is hard to think that we lost any share to them. -IBM's fourth quarter earnings announcement pointed to a 2% hardware revenue decline (offset by very strong services revenue growth). Going forward Looking ahead, Dell officials vowed to move aggressively to pass along cost savings to customers in the form of lower PC prices and at the risk of lower margins to stoke the pace of future revenue growth while continuing to gain market share far faster than its key rivals -- Compaq, IBM and H-P. "Is this the best PC sales company that ever existed?" Daniel Niles of BancBoston Robertson Stephens asked Barron's magazine. "Yes." - He later justifies this by explaining that "Dell is the lowest-cost PC manufacturer," and as such, has a sustainable competitive advantage (in its direct business model) in a commoditized PC market. Dell is very committed to continue its cost leadership and will pursue its infinite fine-tuning of its every business process. Dell's focus on the Internet is also seen as a huge cost saver for our customers - not only reducing their costs of doing business with Dell, but also as a means for the company to reduce its cost of sales - thereby offering lower prices to our customers.