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

To: Boplicity who wrote (111722)	3/24/1999 3:52:00 PM
From: Eggolas Moria	Read Replies (1) \| Respond to of 176387

Thanks for the posting. I would say that his article is quite good in that it hits the major points. He isn't a booster and he isn't writing a short sale piece (believe me, I've seen what he can do if he wants to trash a stock). <<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.> Essentially correct. It might be unfair to paint DELL with the PC slowdown, but it would be accurate to say that the slowdown is bothering investors. The Y2K issue we know already. The issue of maturing is a matter of opinion and he quotes a tech mutual fund manager, so that's OK also. <<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%.>> Hmmm. Cannot argue with the revenue numbers, that's fact. Revenue growth is king amongst institutional investors in this business and in techs in general. Nothing much out of balance there. <<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.>> That's been noticed by many, many people. It's why I focused on M.Dell's statement that he wants to reach 40% share of the PC business globally. He can't do it in the over $1,000 area when the majority of growth is coming from sub-$1,000. Again, that's a pretty fair assessment. <<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.>> Again, this is fair comment, although I would have liked a comparison with other companies who faced a similar situation. DEC comes to mind as I mentioned to BGR elsewhere. Whether he is correct or not in the proffer that entry into this sub-$1,000 market "could keep its revenue numbers in line with expectations at the expense of its future profits" remains to be seen. It certainly is a legitimate comment given Dell's previous comments about why they didn't want to get into this sub-$1,000 market. Jaffe is only reiterating something that has been written about in the WSJ and elsewhere regarding the trading of sales for lower profits. . . . <<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>> I don't see anything wrong with that. Gregory, in general, there isn't anything particularly wrong with this piece. It isn't boosterism and the writer didn't receive a set of kneepads from DELL, but the piece is reasonable.