Annex Bulletin 2005-14                      May 13, 2005

Excerpts from Confidential Client Edition

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INDUSTRY TRENDS

Analysis of Dell’s First Quarter Fiscal 2006 Business Results

Dell Rings the Bell

Stock Surges on Double-digit Growth in Most Markets and Segments

PHOENIX, May 13 – Dell rang the bell this morning on the New York Stock Exchange with its first quarter fiscal year 2006 business results.  Not only did Dell’s stock surge by over seven points; it also pulled by the bootstraps various other competitors’ shares in the process (see the chart).  The “Annex 19 IT Index” was up 1.5% for the day even though the Dow Jones industrials declined almost 50 points (see the chart).

And no wonder… Dell’s net income was up 28% in the quarter to $934 million on a 19% revenue surge to $13.4 billion.  The company also set a new quarterly record with $2 billion of stock buybacks, much more than the company would need for entire year’s stock options, according to Jim Schneider, its CFO (also see “The Phantom Is Back,” May 2005).

[snip]

Horizontal Segments.  Nearly all Dell market and business segments grew in double digits.  The only exception was the PC desktops, the company’s largest business segment, whose revenue increased by 6% to $5.3 billion, while its unit shipments rose by 14%.

[snip]

Geographies.  Europe was Dell’s best-performing region in the first quarter.  Its revenues surged by 20% to $3.17 billion.  It was the company’s sixth successive quarter of 20% or higher revenue growth on the Old Continent.

Services revenue in Europe was up 55%; server shipments were up 23% (Dell claims to have gained 1.2 points of market share to 19.6%); storage revenue was up over 60%; mobile products’ revenue was up almost 40%; software and peripherals’ revenue was up 35%.

In short, business in Europe is great (!) – from Dell’s perspective.

[snip]

Outlook

“More of the same” is basically a summary of Dell’s future outlook.  Indeed, why change a winning strategy.  If Dell stays the present course, we figure it may be an $80 billion-company by 2008.  And Dell has a chance of achieving that without any major strategy changes or fancy new corporate restructurings or acquisitions.

[snip]

The record $2 billion first quarter stock buybacks suggest that Dell is not wavering from that course, either.  On the contrary…

But the biggest reason Dell is ringing everyone’s bell is its ability to win in good times and bad (the latter from competitors).

[snip]

"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin (6 pages in print edition), along with all charts which back up our story.

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Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2005 IT: Dell Rings the Bell (May 2005); Stock Buybacks: The Phantom Is Back (May 2005); EDS Misfiring on All Cylinders (May 2005);  HP Surges, Dell Slumps; Lenovo Completes IBM Deal (May 2005);  Capgemini Jettisons Healthcare in N.A. (Apr 2005); HP: From India to Poland (Apr 2005); IBM: Slammed and Dunked (Apr 2005); Hurd Advice: Up Mount Market Cap (Apr 2005); Accenture: Roaring Ahead (Apr 2005);  Fujitsu Unveils New Servers (Mar 2005);  EDS Executive Suite; HP's New CEO (Mar 2005);  An iSeries Revival (Mar 2005); EDS Booster Club Fees Rise (Mar 2005);  An Upside-Down View (Mar 2005);   The Worst of Both Worlds (Mar 2005);   Octathlon 2005: Accenture Wins (Mar 2005);  IBM Global Services: Smaller, Shorter - Better? (Mar 2005);  IBM 5-yr Forecast: Quality over Quantity (Mar 2005); Rumor Lifts EDS', Fujitsu's Shares (Mar 2005); Capgemini: Turning the Corner (Feb 2005);  IBM Servers to Grow Again (Feb 2005);  Carly's Fickle Fans (Feb 2005);  CSC: Gearing Down on Purpose (Feb 2005);  EDS: Grossly Overpriced Stock (Feb 2005);  IBM Historical Update: 2004 Shot in the Arm (Feb 2005); New HeadTurners Series #1 (Feb 2005); IBM: A Crescendo Finale! (Jan 2005); Accenture: Strong Finish, Better Start (Jan 2005); Annex Coverage 2004: IT Services Dominate (Jan 2005)

2004 IT: EDS: The Titanium Stock (and other Wall Street tales) (Dec 2004); IBM PC: Good Riddance (Dec 2004); Fujitsu: Recovery Continues (Nov 2004);  IBM Server Renaissance (Nov 2004);  HP Hits Home Run (Nov 2004); Capgemini: Revenue, Stock Soars (Nov 2004); EDS: Jordan's Swan Song? (Nov 2004);  To Russia with Love and $ (Oct 2004); IBM: Slow Quarter No Longer (Oct 2004); Accenture: Revenues, Profits Up, Stock Down (Oct 2004); Capgemini: A Takeover Target? (Oct 2004); Sellout of America (Oct 2004); Spy Wars (Sep 2004); Outsourcing Boomerang (Sep 2004); EDS to Cut Up to 20,000 More Jobs (Sep 2004); Capgemini Stock Plummets on Unexpected Loss (Sep 2004); HP Savaged by Wall Street (Aug 2004); Moody's Lowers the Boon on EDS (July 2004); HP: Delivering Value Horizontally (June 2004); Accenture: Revving Up a Notch (June 2004); Beware Your CFO! (May 2004)IBM: Changing of the Guard (May 2004); Capgemini: Texas-size Home Run (May 2004); Following the Money (May 2004);  EDS: On a Wink and a Prayer (Apr 2004); HPS Wins by a Nose! (Octathlon 2004); Accenture: Burning the Track (Mar 2004);  IGS: "Crown Jewel" Restored? (Mar 2004); HP: Still No Cigar (Feb 2004); Cap Gemini: Another, Smaller Loss (Feb 2004); CSC: Good Quarter Gets Boos (Feb 2004); EDS: "Hot Air Jordan" Flaunts Flop as Feat (Feb 2004); IT Industry: Whither Goeth It? (Jan 2004); Cronyism Is Alive and Well at EDS" (Jan 2004)

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Volume XXI, Annex Bulletin 2005-14
May 13, 2005

Bob Djurdjevic, Editor
(c) Copyright 2005 by Annex Research, Inc. All rights reserved.
e-mail: annex@djurdjevic.com

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