Professional Documents
Culture Documents
CORPORATION
James Hsu
Outline
Executive Summary
Industry Overview
Company Description
Business Strategies
Quarterly Income Statement
Competitors
Ratio Comparison
Porters Five Forces
Stock Performance
News and the latest developments
Discount Cash Flow
DuPont Method
Executive Summary
Recommendation: Hold
Original Purchase: 500 shares @ $41.75 on 12/10/99
Current Price: $28.33 on 11/26/02
DCF result: $20.11 ~ $24.58 assuming 17% sales growth rate
Industry Overview:
Computer and Peripherals Industry
Its been a tough year for this industry. Companies has
Company Description
Dell Computer Corporation, incorporated in October
Business Strategies
Direct Business Model:
Advantage:
1. Lower cost: avoid dealers markup and pass the saving
to customers.
2. Customized system: customers get exactly what they
wants.
3. Lower inventory: 4 days of supply in inventory, and
ability to incorporate the latest technologies into products
(avoid accumulation of obsolete items in inventory).
4. Save time: takes only 36 hours to manufacture, test,
and ship customized products.
5. Easy for customers to order: either log on
www.dell.com or call 1-800-WWW-DELL.
Result:
1. Industry-leading results in fiscal 2002 as year-on-year
unit shipments increased by 15% while industry
shipments declined 5%, resulting market share gain in
every region and product line.
2. The Company widened its leading as the worlds No.1
supplier of PC systems (treating Compaq and HP as two
different companies).
3. However, the gross margin declined to 17.7% from
20.2% the previous year.
Reducing workforce and exiting certain facilities to further
cut cost:
Result: Total charges recorded were $105 million. But
expected to result annual saving of nearly $500 million.
Dollar in Millions
(except Per share
values)
11/2/02
8/2/02
5/3/02
2/1/02
11/2/01
total revenue
9144
8459
8066
8061
7468
gross profit
1662
1515
1391
1416
1313
operating income
758
677
590
594
544
net income
561
501
457
456
429
basic normalized
EPS
0.217
0.194
0.176
0.175
0.164
diluted normalized
EPS
0.213
0.189
0.171
0.17
0.157
Competitors in PC industry:
U.S. top five players:
Compa
ny
Shipments (millions)
Market
share
Growth from 3Q
2000
Dell
4.23
13.8%
10.8%
Compaq
3.18
10.4%
-31.1%
IBM
2.00
6.6%
-17.2%
HP
1.95
6.4%
-24.6%
NEC
1.05
3.4%
-27.5%
Others
18.17
59.4%
-7.8%
DELL
HPQ
current price
$28.67
$19.29
$86.20
Market Cap.
$74.3B
$58.9B
$145.7B
P/E (ttm)
Sales (ttm)
38.59
NA
IBM
26.14
$3.55
$1.15B
NA
$33.7B
$56.6B
5.90%
-1.60%
7.20%
-5.30%
7.80%
-2.70%
7.40%
-9.20%
42.54%
-4.65%
25.67%
-18.61%
ROE (ttm)
11/26/02
$80.3B
GTW
$4.25B
Ratio Comparison
Valuation Ratios
P/E Ratio (TTM)
Company
Industry
Sector
S&P
500
36.04
25.06
31.68
23.17
105.71
45.51
67.30
49.97
21.29
17.99
19.96
17.40
Beta
1.89
1.54
1.75
1.00
2.07
1.32
3.76
2.63
14.02
6.44
3.76
4.18
14.02
6.84
4.66
7.05
32.28
22.86
21.15
15.80
20.95
14.68
21.35
26.88
% Owned Institutions
55.30
50.12
46.01
61.40
Company
Industry
Sector
S&P 500
11.14
9.74
6.53
3.74
-1.61
-5.55
-2.45
1.58
32.06
11.91
19.25
11.33
NM
-73.69
10.50
11.88
29.38
-8.66
-14.33
4.20
21.87
8.18
10.32
8.71
21.59
5.90
15.54
10.28
Ratio Comparison
Financial Strength
Company
Industry
Sector
S&P 500
0.83
0.97
2.32
1.09
1.03
1.27
2.83
1.61
0.11
0.41
0.25
0.74
0.11
0.62
0.33
1.02
NM
21.47
8.87
9.52
Company
Industry
Sector
S&P 500
17.58
28.86
50.56
47.7
20.62
30.51
52.97
48.87
8.18
8.31
18.16
21.12
9.64
12.79
22.78
22.15
7.5
4.72
11.82
17.65
8.99
9.04
16.96
18.19
8.09
6.02
12.31
14.93
9.56
10.04
20
17.06
5.75
4.11
6.88
10.57
6.65
6.95
12.44
11.23
28.92
29.06
31.56
33.34
30.2
29.57
33.59
35.79
Ratio Comparison
Management Effectiveness (%)
Company
Industry
Sector
S&P 500
13.69
6.27
3.9
6.36
19.46
11.13
10.03
8.05
30.46
12.62
6.38
10.11
42.98
22.05
15.26
12.85
39.19
21.32
8.77
18.06
55.9
35.77
20.41
21.86
stores
Low product differentiation
Rivalry: HIGH
High concentration
Price War: Low Margin
Decreasing profitability
Low differentiation
However, in the midst of sever
society
important factors.
Dells products are very reliable and
customer service is outstanding. These
two factors help Dell to create certain
brand royalty. But thats given the fact
that the Company set the prices very
low. If the prices are raised too high,
customers will not hesitate to switch.
Stock Performance
PDA Market:
Dow Jones reported that Dell Computer
Corp. will release its first personal digital
assistant (PDA) products in the U.S. in
late November. According to the Journal,
Dell will release two PDA products in
time for Christmas, with the official
launch date Nov. 18.