Hope for Dell

Daniel Gross has more on the recent anti-Dell noises. I still think it’s a thesis looking for a story.

Despite this rash of bad news, it’s too early to write either the Dell-is-doomed or Dell-is-back story. Dell’s business model isn’t broken, and it’s not fundamentally challenged. No, for every trend, there comes a time when you can no longer simply extrapolate the results of the past into the future. It happens to every great company and to every great brand. Dell’s stock still trades at a significant premium to the market. Investors are willing to pay far more for a dollar of Michael Dell’s earnings than they are for a dollar of the S&P 500’s earnings today because they think his will grow faster. To a degree, Dell has finally fallen victim to the same malaise that has affected the other gigantic stock stars of the 1990s: Wal-Mart, General Electric, Microsoft, and Citigroup. They have undergone ungainly transitions from supercharged growth to merely impressive growth. At 21, Dell has belatedly entered its awkward adolescence.

That’s an important reminder, but I disagree. Dell is still able to deliver astonishing growth. The company’s sales growth rate has actually accelerated in the past few years (13.6% in 2002, 17.1% in 2003, 18.7% in 2004; although just l5.3% YTD).

Here’s more on the falling prices in the PC industry.

Posted by on August 30th, 2005 at 11:15 pm


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