Hi Earlie...Congratulations on getting Gretchen Morgenstern's (sp?)ear...
A couple months ago, I promised you I would return when there was more data out (concerning PC's), instead of the rumors and innuedos flying around in Feb./March...I think, for certain, we have a better basis for debate now...
Stock prices-
Well, it looks like we both got a little of what we were looking for...(bad grammar, I know)....If you were skillful with your shorts (puts), you could have made some money off of Dell/Intel (I'm talking post earnings for Dell)...and quite a bit off of Compaq...Having said that, Intel and Dell did not totally crater, and we have seen them come roaring back in recent days...so long-term longs who rode out the storm are fairly pleased as well, and a quite a few shorts got burned as welll.......Gotta to call that one a draw for now, and if you are still short (hold puts), we may have basis for a follow-up on that...
Your analysis of the overall PC market- Got to give you a C+ here, Earlie. Intel never warned. Compaq did. Gateway good earnings. Overall (industry) You and MB continue to try to define the debate in terms of revenues, but it is clear from news reports, analysts' commentary (save Fleck and Meehan) that the debate is about units....and units came in, as most reports would have it, "better than expected", and "seasonally normal to seasonally above normal"....that is not the stuff of disasters.....and all the catterwalling in the world is not going to change this perception (just like in Feb./March, when the "fear game" was in full force, few believed that things were seasonally normal).....bottom line is: the stocks have held their ground (granted with dips along the way)
Sometimes, perception is reality.
And the perception is (and most likely the reality) that the first-quarter was a good one for Intel, Dell, Gateway, IBM (overall), and maybe even HP. But that it was a bad one for Compaq. In other words, the PC industry's problems were mostly company-specific. It is clear that that is how investors have been voting since last Monday (week ago).
(BTW- I do agree with the spirit of Gretchen's article, that a IBM's loss last quarter should not have been so celebrated, in fact, as a Dell investor, it gives me further proof that Compaq (and IBM) are struggling mightily with this indirect/direct ploy which is leaving them half-pregnent, and without shoes)....Every unprofitable (hardware) quarter is one quarter closer to IBM exiting the PC biz en masse (and who do you think we'll be the prime beneficiary then...hmmm)
But I think our debate really was differently defined altogether. My argument was never that the PC industry (overall) is as healthy as several years ago (it is not), or that PC revenue growth (overall) was tepid (it is, I agree), or that the channel partners are in good shape (they are not) or that one should invest in all PC companies. No, my arguments (and your responses) were geared towards one specific company, Dell. In fact, if there were not a company growing as fast as Dell, with management as skilled as Dell, with such a great net strategy, blah, blah...I would not consider defending a significant investment (in one company) in such an industry. But Dell, so far, have proven worthy.
I will grant you that Dell has not reported its earnings yet, so the jury is still out, but, amazing, the numbers that I posted back on the Burke thread back in February (that Dell may grow revenue in the mid-40's y-o-y this quarter, and earnings in the high 40's y-o-y) may turn out to be LOW....but, for argument's sake, let's say, they are about right...if so, this would point to a couple things...
(1) Dell is not growing (anything) at 30%...last quarter's revenue growth slip (to 38%, y-o-y), was indeed, as MD stated, a "hiccup"...and that all the "Dell is growing at 30% a year" postings on the Burke thread at that time were indeed premature (as I tried to point out)
(2) Although Dell's growth rate has slowed from the 50%+ (in some areas), to the 40%s, there are still plenty of folks who would rather pay a 75 PE for a 40%+ grower, than a 25 PE for a 10% grower...
(this is not my logic, this has been the market's logic over the last few years....one may not like it....but it exists nonetheless, and it is likely not to change anytime soon)
(3) Dell (the stock) is not "dead meat"...as MB so gleefully stated only a week ago....up 25% since his pronouncement....Can you ask him to please call it dead meat again?
BTW- The recent IDC/Dataquest numbers pretty easily dismiss MBurke's assertion (made in February) that Dell is losing market share, doncha think? Several of us on the Dell thread explained this to MB until (Dell) blue in the face...that 4Q was a seasonality issue....but Gorilla Monsoon just didnt want to listen..I am fairly interested to hear how Killer Kowalski is going to spin that one...
Finally, Earlie, I would never dispute that falling ASP's are not a severe challenge for PC makers (some of whom just can't make a profit under these new conditions), or that sub-1000, sub-600 or whatever, PC's are not a severe challenge to Dell's business model going forward....what I will (flat out) state is that, until now, Dell has had most of the right answers....and that the toughening market conditions of the last couple years have only served to beat (the hell out of Dell's competitors), while leaving Dell hardly winded...In fact, I would argue, that this tough market is going to bring about the eventual consolidation that will put Dell on top EVEN QUICKER (than if conditions were good)....now, that's gotta be worth something <G>
So, I'm done. Sorry for the length...better quit here and let you attack <G> I'm sure I'll hear from Mad Dog Vachon on this one too.....Look out, I've got Jerry "the King" Lawler in my corner <g> (Yes, he is back to being a good guy again...) Maybe Burke can team up with Fleckenstein (Bill's certainly got the rock-n-roll hair of a top marquee draw...no slight intended, Bill, I am sporting some pretty mean rock-n-hair myself nowadays...) |
