OK, so Dell
Bang and blame
For one thing, the earnings miss was based on analyst guesswork more than it usually is. In the words of CFO Don Carty, "we are not in the guidance business," in much the same way Google and Costco aren't. That means no earnings guidance, no revenue estimates, and no specific margin targets. Without the kind of hand-holding Wall Street expects, it's almost impossible to come up with accurate short-term targets. I don't think it's fair to compare Dell's results to a helter-skelter guesstimate.
Finest work song
More importantly, the management team has identified a handful of high-octane growth opportunities and has committed to do what it takes to realize them. Emerging markets in Latin America and Asia are fueling much of the sales growth you see today, and Dell is sending salespeople into those markets with more gusto than ever. That explains why the promised 10% headcount reduction isn't showing up in the total payroll counts -- they're chopping heads in core operations but expanding the sales force.
Dell holds a slim 15% market share for small- and medium-sized business computing needs, and hopes to expand that share significantly. For example, the company wants to sell "IT as a service" to small businesses. Recent acquisition SilverBack handles that strategy, helping businesses that don't have much of an IT department manage the health, performance, and configurations of their computing platforms.
Of course, rivals like Hewlett-Packard
The large enterprise market has its own needs. CEO Michael Dell compared the amount of data storage space the world's businesses will use in a couple of years to "all the grains of sand on the world's beaches." In a partnership with storage specialist EMC
Find the river
So those are some of Dell's overarching goals. The means of achieving them are something else.
You know how we sometimes wonder what Google will do with all of the cash it makes? And how about Apple
Investing in growth strategies will use up some of that moola in infrastructure upgrades, expanded sales forces worldwide, and an occasional acquisition. But even beyond that strategy, Dell is serious about buying back lots of stock. "SHARE REPURCHASE IS THE PRIMARY USE OF CASH," blares the headline on one slide from the conference call presentation. Loud and clear, Mike.
In fact, it sounds as if the buybacks and growth investments will be large. Other than keeping a couple of billion dollars around for day-to-day expenses and general corporate needs, management sounds ready to dump out most of it -- and take on new debt to push through even more capital expenses. Carty talked about Dell's large "debt capacity" several times, and promised to give us more detail on the capital structure plan on the analyst day next April.
Overall, Dell just wants to grow faster than the competition in the most promising markets, and maximize long-term cash flow even at the cost of short-term cash pain.
Sounds good to me. Any company that works toward long-term goals even when it hurts in the short term is on my watch list. If those long-range strategies also happen to make sense, as Dell's do, the jump from watch list to real-world portfolio starts to look doable. And when Wall Street punishes the stock for the short-term concerns rather than rewarding it for a good-looking bigger picture, well, the deed is as good as done.
Where's my calendar? Ten days of silence ...