Lioness Associates, Inc.

Economic & Corporate Risk/Yield Reports

August 20, 2012  -- Dell Risk/Yield for 2012

Dell is reporting earnings tomorrow and while many are expecting "not so good" earnings (see video), there is potential that the guidance for future quarters may surprise and as a result, lift the stock price. Although, it is worth noting that expectations are low for the quarterly results.

The DELL 2012 Risk/Yield graph indicates that the core yield increases over the early fall period while the core risk decreases suggesting that some of the headwinds start to dissipate over the next quarter.

The DELL Delta Core/Transient graph illustrates the momentum into yield starting around the August period.

The companies that produce PCs in high enough quantities to satisfy institutional/corporate orders are likely to be companies such as Lenovo, HP, Toshiba, and Dell.  Lenovo, being made in China, would find it difficult to sell into companies due to security concerns.  HP, while having good products, may find it difficult to maintain it's toehold with companies due to shifting priorities (and CEOs) within the company. Dell, also struggling to expand it's product line with software acquisitions, may actually be in a better position than the others especially if it focuses on its mobile/tablet products and Dell has usually been a good player with institutional IT departments.  Toshiba may be in a good position as it has also been a good player with institutional IT departments.  Notice that Apple has not been mentioned — Apple sells well to consumers but, it's institutional presence may be lacking.

A new release of Windows by Microsoft is also likely to help PC sales this fall.  A bigger boost may occur with corporate IT replacement cycles for PCs and IT departments may experiment with shifting into mobile and/or tablet devices rather than staying with laptops.    

Tablet/mobile devices over the next few years are likely to "disrupt" the way that corporations conduct their business (
see paper) — both in the way that they interface with the outside world and the way that they conduct their internal processes.  



Disclosure as of 8/20/2012 - Dell Computer (DELL) is not part of our portfolio at this time.