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Analyst Research Report Snapshot


Dell - Company Profile - Little upside potential




Indigo Equity Research


21 Feb 2013





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Company Profile - Little upside potential Investment thesis - Dell's turnaround strategy is fundamentally flawed. ….. Dell is focused on improving its PC margins is at the expense of revenues; But this will reduce economies of scale and margins will be impacted. Diversification away from PCs, via acquisitions into higher growth & margin services, software, servers & storage segments is a sound idea. But the acquisitions are being done at high prices. Also, the companies acquired don't provide Dell with sufficient scale, expertise and advantages to compete effectively in these 'new' areas. Worse, the PC business is deteriorating faster than these new segments are growing. Restructuring charges will be inevitable with all these changes. In summary, despite the cheap valuation it's better to wait for evidence of a turnaround. Overview - 2013 Q4 Results - Another disaster Revenues & margins fell in all products, regions & client groups; except for servers. …. The critical valuation issue is the pending $13.65 offer to take the company private. As this is a buy-out, it is unlikely that the offer price will be raised much or another bidder will appear. If the offer falls apart, the share price will probably fall below $10 due to Dell's weak fundamentals. Thus, there is mostly downside risk at present. This c. 40 page report includes: SWOT analysis, investment thesis, fundamental & DCF valuation, significant recent events, operations analysis, ten year financial analysis, business model, strategy, industry overview, analysis of latest Q results, …. Independent, buy-side, fundamental, financial analysis. www.indigo-equity-research.com

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