Novice Investing - Dude, You are Getting A Dell!

Date: Monday 01st 2008f December 2008 03:22:40 PM

Dude, You are Getting A Dell! - 11/02/2005

By: Novice Investing Staff

You might be happy if you are getting a Dell Computer but not if you are a Dell shareholder. The company delivers the 2nd disappointing earning guidance for the second time in a row. How often do you see that in Dell? Not recently, not in the past few years. Its shares down to below $ 30 for the first time in years.

We believe things will get worse before it gets better. Three months ago, some observers might have thought that these are temporary short term problems. But with its second warning in three months, one start to wonder. Is this the company that use to kick competition out of its way by offering better valued computers at a better price.? It still does. But the truth is, they are low margin business. Dell can only grow so much offering low margin PC to the dwindling pools of customers.

Just like Microsoft, Dell seems to have a ceiling in revenue growth unless it moves away from its low margin PC. For the next few quarters, it seems, management will try to come up with new initiative to spurt growth. That takes time and some investors might not want to wait. That is why the stock price fell right after the short-fall announcement.

Just for your information, Dell Inc. (DELL) can be classified as the company that is down and not out. Last month, we published the difference between down and out. How do we know? Simple. The balance sheet tells it all. Dell still has $ 12 Billion in net cash or $ 5 per share on the balance sheet. Furthermore, that pile of cash might continue growing as Dell is still expected to earn $ 1.59 per share for the year ending on January 06.



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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Dell Inc. (DELL) or any other securities.

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