While the world, me included, awaits every tidbit of news and product announcement from Apple Computer, businesses around the world are mired in a Microsoft centric universe. I’m such an Apple fan that I run 4 30″ Apple Cinema Displays on a Mac Pro tower running WINDOWS!!. But I am telling you to buy both Dell and Apple but you will make more money in the short-term with DELL. This is what Wall Street is missing.
- There is no viable alternative for the back-end of most businesses other than Windows. I’m talking about the business of serving up huge volumes of content, running reams and reams of storage. If a business is going to stay with Windows, they will have few choices of P.C.s, mid range servers and the like. Some percentage of them will buy DELL. Wall Street just doesn’t seem to grasp this and analysts treat Dell like it’s a dying business. It’s not. In fact Windows is still growing. Apple seems to have its hands and coffers full building all of the neatest consumer gadgets in the world. There is no question there OS, their hardware, and their customer service is far superior to anything offered in the Windows world but they dont’ seem interested in business. In fact they recently and quietly abandoned their X server product.
- Using our fave tool ValuePro, the DCF valuation of DELL is $21.53. But that’s using old net operating margins of 3.83%. When I tweak this to reflect recent results last quarter of 8.9% margins, the value leaps to $43.29 and when I change the interest rate assumptions to reflect a 4% ten-year, the value goes to $50.16. That’s the beauty of Value Pro’s neat and free tool that you can easily change the inputs for a lot of what if scenarios.
- So as long as Apple doesn’t want the hard-core business side, there will be room for DELL. And instead of a dying breed, DELL could grow at 5.5% rate based in these cash flow assumptions. The moment though that Apple decides to go after this business, I would unload DELL but that time hasn’t come.