Business Advice

is your arsenal for developing and maintaining sound financial plans and business strategy.

Inside: Budgeting | Compensation | Valuation

Free Trial: Intuit QuickBooks

Simple Start Free Edition 2009 for Windows

Departments

Fresh Inc.

Inc.com Featured Blogs

August 12, 2005

Today's news

Does the Bell Toll for Dell?

Posted by Mike Hofman at 5:00 PM

For the first time in a long time, concerns about the vitality of the technology sector centered around the performance (or underperformance, that is) of Dell computer, the New York Times reports. The Austin area PC powerhouse reported weaker-than-expected quarterly results today, even as some key measures like market share, profits, and sales overseas rose. It should also be noted that revenue was fully 15% higher relative to last year/same quarter. The problem was that the firm was expected to gross $300 million more than it did: a projected $13.7 billion, versus the $13.4 billion Dell ended up with.

Dell's executive team and various analysts have suggested that the company's results fell short of its target due to slowing government spending on technology and over-generous discounts. Some analysts suggested that the company, which has grown by about 20% per year, may settle down to growing closer to 10% to 15%.

Most entrepreneurs I know would be pretty happy to sustain that rate of growth in a competitive market. And yet, the news was considered grave enough to send Dell's stock down by about three bucks a share; it was the most active decliner today on the Nasdaq in terms of dollar volume.

The last time Inc. wrote about Dell was in April, when we put founder and chairman Michael Dell on our cover (along with Richard Branson and Diane von Furstenburg) as 3 of the 26 "Entrepreneurs We Love".

I think we still love him, and that the company will more likely than not surprise us in the next few quarters. Moreover, I think it is utterly amazing that a company can do better this year than last year and be deemed to have failed rather than succeeded. Being inaccurate in your forecasting, it seems, trumps being successful in dollar terms in the minds of investors and observers. CEOs who intend to take their companies public someday would do well to keep that funny little fact in mind.

5 Comments

Posted by: Christian Ritchie at August 15, 2005 1:16 PM

This is a disturbing trend on the street and in the mind of investors today. The death of the overinflated Internet stock did not take with it the matching trend towards fast-paced quarterly profit-taking, which destabilizes the market and creates weakness where it does not exist. Companies with consistent growth and excellent revenue can be penalized for missing numbers or arbitrary targets set by those not INSIDE the company, but passively observing and commenting on the way it SHOULD be from outside. Long-term investment and growth are shoved aside for the benefit of shooting star stock that burns bright and reaps profits quickly. And worst of all, this sort of vicious mindset has spread virally to those who should know better: financial planners and institutional investors, who have always understood that long-term growth was key.

It's past time that more financial professionals stood up for companies that succeed but fail to meet unrealistic targets, especially excessive growth in mature markets.

Posted by: Jeffrey Fry at August 16, 2005 2:14 PM

Business Law #1: Undercommit & overdeliver.

Funny that making money is not as important as predicting the future. People speculate on opinions and not on facts. What a sad place this world has become.

People have to remember, DELL is not a PC company, but a low cost, high volume manufacturer of electronics (like Samsung, LG, or Sony).

Posted by: Chike Eze at August 18, 2005 12:29 PM

August 18th, 2005.

Dear Sir,

My name is Chike Eze, a Nigerian student
entrepreneur. I got your email address from a back issue of
FASTCOMPANY magazine and I figured that if you are a regular reader of
FASTCOMPANY, you probably know a lot about small businesses. I visit
the INC. and FASCOMPANY websites regularly but they do not offer
direct counseling or information to entrepreneurs. I am very big on
networking so I try to get ideas from intelligent and innovative
people. I am currently in final year in college and I want to start a
business before I graduate. I am thinking of starting a hamburger and
hotdog stand in my college. Western culture is so big in Nigeria
courtesy of the Internet, globalization and MTV. However, things like
vending machines and hamburger and hotdog stands are still scarce. I
have started a study on fast food businesses but I have to start from
scratch since there are no such businesses here. I am sure that if
properly run, the venture will turn a profit and I have dreams of
building a mega brand like Starbucks in Nigeria. I have always wanted
to start my own business and I strongly feel that the only way
developing countries like mine can get out of their present state is
through the implementation of innovative ideas and the enthronement of
a viable entrepreneurial culture. I also provide consulting services
to companies that intend to do business in Nigeria. Nigeria is one of
the top ten oil-exporting countries in the world and given the present
price of oil, it is provides a very big opportunity to interested
businessmen. However, there is a high incidence of fraud here so any
prospective investor should have all the necessary information ready
before he takes the plunge and this is where I can be of help. I will
greatly appreciate it if you can be of any assistance in my Hotdog and
Hamburger venture. Thanks for your anticipated co-operation and
assistance.

Yours Faithfully,

Chike.eze@gmail.com

Posted by: Chike Eze at August 18, 2005 12:41 PM

I just heard that the latest issue of National Geographic had no picture on the cover for only the second time since 1944. The editor said that he chose to make this decision because he wanted people to realize that Africa is not one place but millions of places. And that there were lots of diverse voices and peoples expressing themselves in Africa. I have long argued that the West had a wrong view of Africa, one that is enhanced by the constant pleas for debt relief and aid. Africa does not need debt relief, it needs renaissance and this can only happen when companies start investing in African countries. It should not be just for profit but for re-education and renaissance. After all, see what outsourcing has done for India. We need knowledge and entrepreneurship and not aid.

Chike.eze@gmail.com

Posted by: Daryl Kulak at August 23, 2005 5:01 PM

It used to be that there was a "Fortune magazine cover curse?" Remember? If you got featured on the cover of Fortune magazine, your business was headed for a downturn.

Are we saying that now there's an "Inc. magazine cover curse?" Poor Mike.

Post Your Own Comments

Try a RISK-FREE Issue of Inc. Today!

Renew | Contact Us | Current Issue