Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: J.C. Group who wrote (127157)	5/20/1999 3:09:00 AM
From: jim kelley	Read Replies (3) \| Respond to of 176387

Re: "Here are the gripes that will hinder Dell shares: Gripe 1: You'll hear a lot about this one. Dell's gross margins fell to 21.5 percent from 22.3 percent a year ago and 22.4 percent in the fourth quarter. Analysts were expecting margins of 22 percent. Average selling prices fell to $2,300 from $2,475 a year ago. In the fourth quarter, Dell maintained margins, avoided pricing pressures, but revenue suffered. This quarter, Dell was aggressive and Wall Street frets about margins. Dell can't win. " Reply: Actually, it looks like the hit to the margins did not have anything to do with the decline in ASP's or a squeeze on cost of goods.. It was due to the hiring of 1700 new employees in the quarter. This showed up as a manufacturing variance in the COGS. DELL needed to hire these people and get them trained to support the the new factory in Tenn. They will need the manufacturing and support capacity badly before the Y2000. Thus this modest decline in Gross margin is most likely a temporary matter and is due to various manpower recruiting and training costs. The decline in Desktop ASP and Enterprise ASP's were modest. However, there was heavy competition in the notebook arena and the notebook ASP dropped the most. DELL is now selling about as many notebooks as CPQ. Gripe 2: Revenue was $5.5 billion. Sure it hit targets, but USB Piper Jaffray analyst Ashok Kumar was hoping for an extra $200,000 at Compaq's expense. Amid the tough pricing environment, Kumar lowered his second quarter revenue targets to $5.81 billion from $5.9 billion. For the year, Kumar cut Earnings estimates to 69 cents a share from 76 cents a share. Reply: Europe would have added about 110 M to the top line. Also, revenue lost due to delayed shipments of notebooks was off by 1- 2 days due to a shortage of displays. Display lead time is currently 12 days. the revenue shortfall from missing 2 days of shipments is about 133 M. Add these two numbers together and you get the magic 5.8 B revenue number. Gripe 3: European sales as a percentage of revenue slipped to 24 percent from 27 percent last quarter. The company is still outpacing the industry overall and U.S. sales were strong, but may not stay that way. Reply: DELL did run into fierce competition in Germany and France. Also, there is a war going on over there which is undoubtedly distracting the Europeans. So DELL needs to address the European revenue issues in Germany and France. I believe they are. So DELL could have made 18-19 cents on revenues of 5.8 B if it had not had to invest in personnel to expand capacity, had not had minor supply problems with notebook displays, and had been more aggressive and smart in Europe. There is no fundamental shift in DELL's prospects IMO. ALL in all they did a great job this quarter in the face of high expectations. Regards, Jim Kelley