But if energy prices hold fast and developing-world consumer demand continues at the current or slightly slower pace, world economic growth could surprise investors in 2005. The Economic Cycle Research Institute's weekly leading index, which has correctly forecast every recent slowdown and recession, has pulled out of its 2004 nosedive in the past few weeks and stabilized. The index hasn't turned back up yet, but on the ECRI's 30-year chart, the abrupt change of direction looks eerily like ones that occurred at the end of 1982 and 1994, just before sharp changes in the nation's economic fortunes.
The Wal-Mart of PC Makers
As information-technology spending turns up a bit itself, Dell has probably better prepared itself to succeed than any of its vendors, such as Microsoft, Intel ( INTC), Nvidia ( NVDA) and Western Digital ( WDC). That's because Dell is a lot like Wal-Mart ( WMT): It's a dominant low-overhead retailer with the power to grind vendor prices down to the bone to expand its own margins. Component makers' shares would rise sharply from today's extremely depressed levels in the event of anticipation of an industrywide upturn, but Dell is more likely to be able to sustain a move. In 10 years, after the next peak, dozens of little vendors will merge or get wiped out. Dell, however, will survive. That's what longer-term investors will focus on. Helping Dell to thrive is its proven ability to push into the enterprise space and offer midrange product functionality at low-range prices -- undercutting the likes of Hewlett-Packard ( HPQ) and IBM ( IBM) to gain market share. What it has done in PCs it is now doing in storage, printers and IT management/deployment services, which are the fastest-growing segments of technology. Partnering with industry goliath EMC ( EMC) to provide top-notch network storage systems on a direct-sales basis has been a masterstroke, generating new higher-margin sales for Dell that extend well beyond the PC.