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

To: Rich Young who wrote (116834)	4/12/1999 11:27:00 PM
From: Todd E Godwin	Read Replies (10) \| Respond to of 176387

Yeah, DELL conspicuously absent from the pooh-pooh parade today. Funny how this whole thing is kind of working out to Dell's advantage in the end. I think you're a little off base here. PC prices are coming down faster than their unit growth rate. The biggest PC maker in the world just came out and said demand is waning and that earnings are in the crapper. What do you think CPQ is going to do to get back in the game? Raise prices? I think not. They are going to ruthlessly cut prices. The PC war that's been going on just got turbo-charged. It doesn't matter that Dell can execute better (they are the best) - what matters is Dell's ability to continue its earnings growth trend in this environment, and frankly, I think it will be impossible. Measurable earnings growth comes from one of two things - either increased profit margins and steady revenue (market wants top line growth, so that's no good) or increased revenue with steady to slightly lower margins (if margins are coming down, the market won't like that either) The way I see it is that Dell has to increase revenue while trying to hold margins steady. Good luck in this market. Dell has executed to perfection, no doubt. But sometimes you can do everything right and still not come out ahead. The PC war is shaping up to fit that scenario. I'm not saying Dell isn't going to make money - they are indeed going to make millions and millions of dollars selling PC's over the many years to come; however, their growth will be minimal at best, especially compared to what we've seen in the past 6 years. So great! They're going to make tons of money selling PC's; but wait, Wall Street expects 30%+ earnings growth over the next couple of years and has tagged DELL with a forward PE of over 50. Pretty high expectations and deservedly so. Dell's past suggests that even current prices may be cheap relative to its past growth rates. But again, that is the past, and unfortunately, Wall Street likes to look forward. And the future doesn't look like it will be able to support Dell's past performance or its expectations. Now, I know I'm going to have my ass flamed to no end for saying these things, but I really believe the glory days of Dell are over. Period. I think the stock will never see its highs again. Period. I think Dell's next earnings report will be mediocre at best. I think their ASP's are going to show the biggest decline in their history. I think they will talk down their future growth. I think their Q2 report will be even worse. I shorted Dell today at 41 3/8. Eureka! He's short! Yep, I sold 1000 shares of Dell to someone today. I'm already losing money on that trade. Dell will probably gap up a little in the AM. If Intel reports good numbers, it will go up more. It may get caught up in the overall warm fuzzy of the current market. No matter. In the long run, I think I'm right. All the best, Todd