Recommendation: Hold
Currently, hold 500 shares at the market price of 40.70
Market Value of 20350.
We purchased these shares on December 10,1999 for
41.75
Cost Basis of 20875.
Dell has never paid a dividend
The Financial Analysis shows that Dell might be slightly overvalued in the market. However, the company continues to grow and steal market share
Additionally, the overall economy is heating up, which means more business for Dell

Originally incorporated in 1984 in Texas and then incorporated in 1987 in Delaware
Corporate headquarters located in Round Rock,
Texas
Sells computers, peripheral equipment, and services worldwide
Its manufacturing facilities are located in: Austin,
Texas; Eldorado do Sul, Brazil; Nashville,
Tennessee; Limerick, Ireland; Penang, Malaysia; and Xiamen, China.
Customers: From large corporate and government to individual consumers
53,000 employees worldwide

Notebook Computers: The Latitude and the Inspiron line of notebooks
- Number one in the U.S. and number two worldwide in shipments
2003.
Desktop Computer Systems: The OptiPlex and The
Dimension desktops
-Number one in the U.S. and worldwide in desktop shipments in
2003
Printing and Imaging Systems: consumer inkjets to large workgroup lasers
Software and Peripheral Products
Includes memory, digital cameras, projectors, scanners LCD televisions, and MP3 players

Storage: Dell/ EMC systems and Dell’s PowerVault
Net revenue for Dell’s PowerVault and Dell/ EMC systems grew 58% during fiscal 2004
Servers: Dell’s standards-based PowerEdge line of servers
-Dell ranks number one in the U.S.
Workstations: Dell Precision desktop workstation or mobile workstation.
Networking Products: Dell’s PowerConnect switches

Managed Services
Professional Services
Deployment Services
Support Services
Training and Certification Services
Dell Financial Services L.P.
- A joint venture between Dell and CITI
Group, Inc in US

Most efficient path to the consumer
Single point of Accountability
Build-to-order
Low-cost leader
– Efficient supply chain
Standards-Based Technology

Main Advantage: Low Cost Leadership
- allows Dell to maximize market share
Product Diversification
- trying to bring its efficient business model to other product lines such as printers
- sell over 5 million printers this year
Global Growth
- plans on expanding market share in Asia, especially China

Recent high growth rates was a result of a depressed market over the past years
Currently, Global consumer PC demand is relatively high, but that is expected to decrease after 2005
Corporate demand expected to stay strong

SIC 3571 - Electronic computers (primary)
Frequent acquisitions, joint ventures and alliances
Component Construction outsourcing for cost-effectiveness
Increase in offering integration and support services

Bitter price wars
Price Sensitive Consumers
Small product differentiation
Escalating market share race
Dell and HP lead the consumer PC market
– Dell uses direct sales model
– HP sells through retail channels

Bargaining Power of Buyer: High
Industry Rivalry: High
- Price and Market Share Wars
Bargaining Power of Suppliers: Moderate
Threat of New Entrants: Low
- High Economies of Scale
- Profit Margin on PCs decreasing
Threat of Substitutes: Low
- Apple computers, high switching costs

Main competitors: IBM, H-P, and Gateway

Market Cap
P/E
EPS (ttm)
Revenue (ttm)
DELL
101.61B
33.64
1.21
47.26B
HPQ
58.65B
18.25
1.064
78.37B
IBM
159.68B
20.4
4.703
94.74B
GTW
2.22B
N/A
-1.931
3.50B
Profit Margin (ttm) 6.61% 4.17% 8.56% -19.23%
All companies have seen an increase in revenue over its past
3rd quarter
- Dell the most
HP did not meet its own forecast for its third Quarter
Dell entered printer market to hurt H-P
Industry P/E: 34.11, Sector P/E: 34.58 (ValuEngine report)

2004 Fiscal Year:
- Net Income increased 25% and 70% prior year
- Revenue increase 17% up from a 14% increase the year before
- Earning per Share were:
1.03 in 2004, .82 in 2003, and .48 in 2002
2005 Fiscal Year looks very promising
- Revenues rose 19% and net income rose 25% overall
Company predicts to become a $60 billion revenue company sometime in 2006

In the third quarter:
- Earned $846 million compared with $677 million a year earlier
- 33 cents a share from 26 cents a share a year ago
Revenue rose 18 percent to $12.5 billion for the third quarter up from $10.6 billion the year before
For the third quarter:
- 27 percent growth in Europe, the Middle East and Africa
- 25 percent growth by Asia Pacific region and Japan
- 20 percent growth by United States business customers

Sales outside the U.S. accounted for approximately 36% of Dell’s net revenue in fiscal
2004
Revenue Breakdown:
Americas – Business 21,888,000,000
Americas – Consumer 6,715,000,000
Europe 8,495,000,000
Asia Pacific-Japan 4,346,000,000
Total Revenue 41,444,000,000

The P/E Approach
- Price of $42.21 by end of January; P/E of 32
- P/E of 20: price is $26.38
- P/E of 40: price is $52.77
DCF
- Results in a price of $31.85
Look at Spreadsheet

Growth and Expansion
- New U.S. manufacturing facility in North Carolina
- New customer contact center in Oklahoma
- New distribution center in Ohio for Dell's growing printing and computer peripherals business
Services contracts
- Three year multimillion-dollar contract from Honeywell to manage its 16,000 desktop and notebook computers in Europe
Strategic Alliance with Microsoft
- Unveiled new software that updates Dell servers at the hardware, software, and applications levels with “one mouseclick”