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>> Is Dell getting slightly stronger or slightly weaker at managing its inventories? ....

One way to narrow the list down is to find slippage on our CK criteria -- gross margins flattening out, a Flow on the rise, cash-to-debt slipping, et cetera. <<


OK - I've already posted that I'd put DELL in the final 5, in fact probably give 'em the final 1 slot. This week will probably put my own real money in too. Even at this ridiculous, expanded P/E.

Let's address some of Tom G.'s questions.

In past 5 years, "days in inventory" have gone from 35, 31, 13, 7 ... and announced target (yet to be acheived) of 3 days at end of Fiscal 99. If direction is more important than location, it's going the right way.
Seems likely to asymptote soon, but all the other guys, Gateway included, have a couple years of catch up on this one, and moving targets are hard to catch.

Cash has increased by over $1.5B since '94. I admit not checking cash-to-debt, but long-term debt is just $17M at FY 98 end (down from $18 last year) so I'll give 'em benefit of doubt while I check the details.

Dell's number one CK shortcoming is gross margin. Arguments have been made (I think by FFD, but can't recall, sorry) are that Dell is the master of passing on cost-reductions back to its suppliers. Evidence is that gross margins have been steady at 20-22% since '94. Not improving (98 was 22.%, a new record, but previous years have been sequentially up or down) but clearly not declining. At a time that my favorite disk-drive makers have been slammed to the wall, Dell maintains constant margins at better than 20%. Cool.

And let's look at Net Margins - the bottom line.
Past 5 years:
(1.25), 4.28, 5.13, 6.62, 7.66 % - at time that sales have improved from $2.9B to $12.3B, the new sales come at higher margin !

Is this a business model success story, or what ?

So the have short history with Net Margins above CK threshold, but the slope is in the right direction. They fail the "gross margin" threshold, but have 5 years history of holding the line there... at a time that all of their suppliers have paid the price instead of Dell. And their Net has steadily improved thanks to much improved and improving inventory controls - a bonus to the flow-ratio that is also on the improvement side.

One last thing I really like about Dell. They put their financials in easy to find place on the web, in easy to use format. Easy to do your homework.
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