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

To: Eggolas Moria who wrote (111720)	3/24/1999 3:23:00 PM
From: Boplicity	Read Replies (2) \| Respond to of 176387

USINESS WEEK ONLINE March 24, 1999 STREET WISE by Sam Jaffe Why Dell is Taking The Market Lower Even a sub-$1,000 PC can't keep the juggernaut from slowing further With the Dow Jones Industrial Average index hovering around 10,000, a 218 point drop wouldn't seem like much. It's only 2%. We'll make it up tomorrow. Tell that to Nasdaq investors: The Nasdaq 100 index was down 3% on Mar. 23. And there was serious bloodletting in the computer sector. Hewlett Packard (HWP) was down 2.6%, Gateway (GTW) lost 5.5%, and Micron Electronics (MUEI) was down 3.2%. The leader in this parade of grim faces was Dell (DELL), which fell 5.8%, and is down 12% in less than a week. Dell has been the bellwether stock in the computer industry. Now it's getting its bell rung. What's bothering investors about Dell? First and foremost is an overall slowdown in PC sales. Some blame that on large corporations, which are spending their technology budgets on fixing their Y2K problems instead of on new PCs. Others see the problem as the inevitable decline in the growth curve for the industry. "I think that the PC industry is maturing," says Firsthand Technology Leaders fund manager Kevin Landis. "Part of what you're seeing is that PC companies have to adapt to running a very lean model." Either way, the PC slowdown is no longer just a fear or a rumor -- it's reality. WHITE FLAG. Dell signaled as much when it announced as part of its fourth quarter results last month that it was already suffering from the slowdown. Although earnings were in line with expectations, investors were spooked by a drop in revenue growth. Even though Dell may be a mature company, top-line revenue growth is king in the commodity business of making PCs. And in the fourth quarter, Dell's quarter-over-quarter sales growth slowed from 55% to 38%. Mainly to address that problem, Dell announced in mid March that it will soon introduce its first sub-$1,000 PC. While that might not seem like big news -- everyone else is doing it, after all -- it did signal a white flag from Dell's Austin (Tex.) headquarters. Executives there have until now dismissed the cheap segment of the market as a wasteland for profits and have refused to enter it. Now, they've admitted defeat. Rather than react positively to that news, the market has punished Dell and the entire PC industry (with Compaq being the notable exception this time around.) Investors understand that Dell will need to sell a lot of low-end computers to meet its revenue targets. But they also know that could jeopardize its sales of more expensive (and profitable) computers. In other words, Dell has finally entered a race to the bottom that could keep its revenue numbers in line with expectations at the expense of its future profits. Who is to benefit from all of this? Surprisingly, that other technology bellwether, Intel (INTC), may be in a good position to clean up. Although competitors AMD (AMD) and National Semiconductor (NSM) are winning market share on the low end, the sheer volume of cheap PCs being sold means more sales for all three chipmakers. In addition, Intel has cut costs significantly over the past 18 months, so that it is far more able to remain profitable even if its product mix favors cheap PCs. There's only one solace, if you're a regular investor in technology stocks. Remember that the current market is in a seasonal correction, not a tech stock crash. "I'm pretty happy today," says Landis. "I always liked sales." Jaffe writes about the markets for Business Week Online Copyright 1999 The McGraw-Hill Companies All rights reserved. Any use is subject to (1) terms and conditions of this service and (2) rules stated under ''Read This First'' in the ''About Business Week'' area.

To: Eggolas Moria who wrote (111720)	3/24/1999 4:02:00 PM
From: JRI	Read Replies (2) \| Respond to of 176387

Gary- In reading Jaffe's piece.....I don't find it particularly balanced.. He seems to see Dell's lone $999 PC offering as "raising the white flag" and Dell's primary answer to a slowing growth rate in other areas.... Not even the biggest bulls among us (or analysts) believe that having ONE PC model selling for $999 is going to make up for several % points decline in other areas....it is an extremely small piece of the business, even if it were to be successful.. Secondly, it is painfully obvious that sub-1000 now does not mean the same thing as sub-1000 12-18 months ago....Journalists and analysts formerly used sub-1000 as a substitute for "low-end" of the market......Many journalists/analysts seem to like to continue to use sub-1000 to mean the low-end of the market.....One can clearly no longer do this....also, having ONE $999 unit offering does not represent going after the low-end of the market...because it is no longer the low end! The low-end is around $500-600...thanks to E-machines and others...Dell does not play in the low end, and hasnt shown an inclination to do so....not even now....the $999 offering is best classified as addressed the lower middle-segment of the market... A year ago, there was not a Celeron chip...and Dell's comparable offering was around $1200-1300..due to component price reductions (and Celeron), the comparable unit is now $999...this hardly represents the "white flag" that the author seems to indicate... If Dell would come out with several models...some priced at $700-800...then I would agree with the author... The writer neglected to mentioned the real focus of Dell's future growth: international, high-end (and some middle) consumer, storage & server, and on-line periphrials...this is clear to anyone keeping up with the company..however, I'm sure it is "NEWS" to harp on the Dell is in the sub-1000 segment (disregarding the arguments I have laid out)... In today's frenzied, PC's are going-to-hell environment, it was a pretty shallow piece, as was his response to G. Mullineaux...

To: Eggolas Moria who wrote (111720)	3/24/1999 4:21:00 PM
From: Boplicity	Read Replies (1) \| Respond to of 176387

Subj: Re: Bad reporting on your part Date: 3/24/99 2:44:50 PM Central Standard Time From: Jaffebw To: GMullineau I disagree that Dell is having others buy back stock that they feel is undervalued. All they are doing is buying options. Derivatives, including options, are designed to reduce risk. Often, companies get carried away and start using them for speculation. Is Dell a trading house or a computer manufacturer? If they are a trading house, then maybe they should be given a valuation of a speculative financial enterprise. If you are a Dell shareholder and you aren't worried about their CFO gambling with the company's revenue stream, then you should read about what happened to Metalgesselschaft about five years ago. Dell is a great company that is being managed by some of the best executives around. The market has recognized this and has given them a multiple that is much higher than their peers. When I see that management is spending the money earned by selling PC's at the racetracks (or the equivalent thereof), I start thinking of the decline and fall phase. But again, that's not what this morning's article was about. It was only meant to explain why Dell's stock has been dropping. --Sam Jaffe Staff Writer Business Week Online Pretty nive guy to engage me on this, but we are not going to get anywhere. Greg