09:22 EDT DELL Dell Inc-DELL target lowered to $29 from $31, maintain Outperform@BERN
Bernstein has reduced confidence in management’s ability to execute following the company’s Q3 results. They see share downside to the $20 with limited near-term catalysts.

I follow DELL this closely because its a fascinating lesson in the nature of crowds and investor psychology. The day the Street capitulates on DELL will be the day massive gobs of cash will look for a new blue chip tech growth stock to pour into. I wonder which one they’ll pick.

[quote author=“awcabot”]R&D from F2003 to F2007 grew 10%, where at Apple it grew 50%. Only in the past year does it seem as if R&D is getting some money. So far for F2008 R&D it has grown 30%.

Its cash reserves are about $12B and its shareholder’s equity has been growing, but are both lower than Apple.

I believe Dell is a viable company and it could avoid the fate of Gateway and become more of a technology driver than technologically driven. But my money is on Apple, on which my doubts have been driven to nil.

Yeah but . . .

(a) $9B of Dell’s $12B “cash” comes from the fact that they are taking 62 days longer than Apple to pay their suppliers. Add to that the fact that it is largely somehow stuck overseas for obscure tax reasons (referred to indirectly again by Carty in the conf call).

If they paid suppliers in 28 days like Apple, they’d have $3B cash.

(b) Dell are supposedly now subcontracting R&D to the far east and they’ve made some acquisitions with R&D overheads. R&D may have increased, but I think it’s ad-hoc and piecemeal tactical attempts to shore up sales. There is no attempt to develop a cohesive body of IP.

Take a look at Dell’s financial fact sheet and you’ll see headcount is up from a year ago (despite a commitment to cut 10%); days supply in inventory is up 80%, days of sales outstanding is up 15%, and their famous “cash conversion cycle” is 5 days worse at -35 days. These are all signs of a business unable to maintain its operations, and it amazes me that no analysts or sophisticated financial types seems interested.

Dell has an investor blog , btw.

A reader comment:

Long-abused Dell stockholders, encouraged by recent company initiatives, would have been grossly disappointed by the totally unsatisfactory and business-as-usual conference call with analysts after the earnings report on November 29th.
Along with the numerical results, which after all weren’t that bad, the passive and bureaucratic tone of Dell’s management in the conference likely contributed to the hammering of the stock the next day.  How is it that this drab, worn-out style is supposed to fight its way back to the top of the technology sector while breaking new ground in the global consumer area? 
Dell’s senior management conducted the call in such a stale, platitudinous, down-beat fashion—tedious with the rhetoric of vague and empty aspirations such as “sustainable growth”, “shareholder value”—that it’s hard to believe that it’s energetic, creative, or even ticked off enough to turn things around….

[quote author=“awcabot”]I believe Dell is a viable company and it could avoid the fate of Gateway and become more of a technology driver than technologically driven.

Financially this is true, but being a tech driver is not currently part of the Dell corporate culture.

In the short term, they could start by hiring some better designers, which would cost a pittance. Their computer hardware looks absolutely awful right now - I am embarassed for them every time I walk past their kiosk at DFW. No wonder HP is kicking them in the behind. Dell monitors are still a good deal and look OK.

Dell certainly has the resources to be a technology leader, and it will be interesting to see if they have the will to transform themselves from a dead-end bargain box pusher into a company with vision.

Because of this, going long on Dell looks like a real crapshoot right now - Is vision to be found anywhere in Dell’s DNA?

[quote author=“Tommo_UK”]

09:22 EDT DELL Dell Inc-DELL target lowered to $29 from $31, maintain Outperform@BERN
Bernstein has reduced confidence in management’s ability to execute following the company’s Q3 results. They see share downside to the $20 with limited near-term catalysts.

I follow DELL this closely because its a fascinating lesson in the nature of crowds and investor psychology. The day the Street capitulates on DELL will be the day massive gobs of cash will look for a new blue chip tech growth stock to pour into. I wonder which one they’ll pick.

Agreed.

Over $20 billion in shareholder resources exhausted through share buybacks to keep the stock price stagnant isn’t a success story. It’s an corporate train wreck. 

Desperation reeks from this one:

12:19   DELL Dell could eye Motorola unit, Attachmate, others to boost growth, sources say - FT Mergermarket (24.07 +0.47)  -Update-

FT Mergermarket reports Dell, the No. 2 US PC maker, could use its cash to acquire listed Motorola’s (MOT) handset business, private Attachmate or other cos, industry sources told mergermarket.

Industry bankers said that Dell might want to compete with listed Apple’s iPod and iPhones. Motorola’s handset business might be a fast entry into the mkt said one veteran technology banker, especially because Dell’s consumer products head, Ron Garriques, headed it until a year ago.

Dell’s former CFO, Tom Meredith, now holds the same position at Motorola. Following on Dell’s plans to focus on simplifying technology, industry sources also suggested private Attachmate of Washington, which specializes in configuration and compliance software, or smaller, listed NetManage (NETM), might be attractive. Attachmate, which acquired NetIQ for $495 mln last year, is owned by Golden Gate Partners, Francisco Partners and Thoma Cressey Bravo and has annual revenue exceeding $250 mln.

so.. $10B on a share buyback. God-only-knows how much buying MOT’s under-performing handset business. Any other brain waves, Michael?

Watch gross margins plunge, opex shoot up, DELL go down the crapper.

Dell, the No. 2 US PC maker, could use its cash to acquire listed Motorola’s (MOT) handset business

YGTBFKM. Absolutely awesome if true.

Ahhh sweet.. a columnist who really gets it

Chris Laudani
Dell?
12/5/2007 2:44 PM EST

Jason, I disagree. What’s so solid about Dell’s fundamentals? Inventories up 62%, and accounts receivable up 28% on a 9% y/y revenue growth rate. Aren’t they just stuffing the retail channel? (i.e. Wal-Mart and Staples)

Didn’t iSupply say, just last week, that for the fifth straight quarter that HP has held a “commanding lead” over the rest of the global PC market?

According to iSupply, Dell shipped just 100,000 more PCs in the last quarter than in the same period last year. (In contrast, Acer sold 2.2 million more PCs in the same period.) Dell’s market share fell to 14.6% in the third quarter, down from 16.3% a year earlier. In the third quarter, Dell posted the weakest growth among the top five PC makers. According to iSupply, Acer took the number two spot in laptops. (Yeah, Acer.)

What’s so great about that? Hasn’t the business (and profits) been shifting to laptops (and the Mac?). Shouldn’t Dell have been doing better than that? Acer and Apple taking it to the bank on Dell. Ouch!

Oh, and everyone loves insider buying. So what. Okay, a bunch of multimillionaires bought a tiny amount of stock. (They probably spent more money renovating the guest house at the Aspen mansion than they did on those fabulous insider buys.)

These guys know how to play the game. They did it so it would show up on some quant stock screen. Now, some freshly minted CFA kid at Mutual Fund Madness can tell his style boxed bosses that Dell popped on his insider buying screen. They did it so management can hit the investment conference circuit next month and tell PMs over chicken at the Marriott they have total confidence in the company and management is “putting their money where their mouth is.”

Execs don’t make money on their stock purchases, they make it on the exit; an extra $200 million to “spend more time with the family” after the company misses a couple of quarters.

And what’s the big deal about the buyback? Just because management announced some huge buyback, doesn’t mean the stock will go up. Look at Sears. Wasn’t it last quarter that Sears threw $3 billion down the toilet on a buyback. Isn’t that stock down some 35% since the July? A lot of good that did them. Shareholders would have had more fun burning the money at the beach in a giant bonfire/clambake/jamboree. Hey, they could have hired Jimmy Buffet too. (And Sears really needed that cash too!)

I don’t why the Street is so fascinated by share buybacks. It represents an asset implosion for a non-growth company.

Why not instead declare a $1 per share annual dividend which, in Dell’s case, would provide a guaranteed 4% yield on a high-risk equity and provide the company five years of breathing room to retool operations and market orientation to match results with the shareholder dividend outlay and sustain the dividend after the $10 billion is exhausted.

The stock would move higher immediately and the market would cut the company a great deal of time slack.

DELL (non)Direct

Dell has finally admitted how much it needs the channel and has launched a worldwide programme to help dealers and systems integrators to push its kit.
The vendor, which pioneered the direct PC model, appears to have stopped short of publicly offering channel players discounts, but will offer its top partners “incentive-based co-marketing funds”.

The struggling PC vendor unveiled its PartnerDirect programme yesterday, saying it was available to US channel players immediately and would come to other countries in the New Year.
PartnerDirect will have two streams. Registered Partners will get “basic benefits” including logo usage, a partner website for orders, marketing materials, and “enhanced post sales support and financing options”.

Artile at The Register

How else will the company achieve its staff reductions? Essentially, the partners become the company’s sales force.

The dangerous presumption is that the brand holds some kind of sales value to “partners.”

So what happened to “direct”?

As of this morning, Apple how has 3X Dell’s market cap.

Two companies going opposite directions.

SFGate Technology: It’s a high-tech world - - we just plug you into it…

(12-06) 09:37 PST DALLAS, (AP)—
Dell Inc. is venturing further from its direct-to-consumer sales model and will start selling computers at Best Buy stores in January.
The companies said Thursday that Best Buy Co. will sell Dell’s XPS and Inspiron notebook and desktop computers at more than 900 stores.

[quote author=“danthemason”]SFGate Technology: It’s a high-tech world - - we just plug you into it…

(12-06) 09:37 PST DALLAS, (AP)—
Dell Inc. is venturing further from its direct-to-consumer sales model and will start selling computers at Best Buy stores in January.
The companies said Thursday that Best Buy Co. will sell Dell’s XPS and Inspiron notebook and desktop computers at more than 900 stores.

There’s no BTO margin upsell opportunity and the company will stuff the channel (for another quarter) hoping to buy yet more time. Not a pretty picture come 2nd calendar quarter results.