PCs Languish, but Dell Leaps Ahead
And on Sept. 1, Dell launched three aggressively priced color laser printers based on the technology of partners, including a high-end model that does 25 pages per minute in color for $999 -- half the price of similar functionality from H-P. Moreover, its toner pricing is 0.6 cents per page for black and white and 6.9 cents per page for color -- 67% and 28%, respectively, below H-P pricing, according to analyst Shannon Cross of Cross Research LLC.
The Numbers: Very Impressive
Dell sales have totaled $45 billion in the past 12 months and are still growing at an impressive pace, about 19% a year. Meanwhile, earnings ($3 billion in the past 12 months) are still growing at an annual rate of 19% to 25%. Cash flow, slightly less awesome than a few years ago, is still ridiculous at better than $3.6 billion a year. The next big goal, according to the company, is $60 billion in sales by 2006 at the same level of profitability.
Founder and chairman Michael Dell gave up the CEO reins this summer to Kevin Rollins. Essentially, though, they run the company together now as they always did -- focusing much more on perfecting efficient manufacturing and distribution practices than on innovative technology. In a price-conscious world of commodity products, that is bound to be a winning formula for many years to come.
The problem with Dell's share price has not been the business; it's been a contraction of its P/E multiple to account for slightly lower expectations. That may be almost complete now, so if you're patient, you're likely to see that the share price will follow earnings growth over the next year and beyond.
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