Mission Statement

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(No Transcript)
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Mission Statement

• Dell's mission is to be the most successful
  computer company in the world by delivering the
  best customer experience in the markets they
  serve.

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Overview

• Founded by Michael Dell
• Founded in 1984
• Direct business model allows Dell to build every
  system custom to order

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Milestones

• 1985
• Company introduces 1st computer system of its own
  design, the Turbo
• 1987
• Dell is the 1st computer company to offer
  next-day, on-site product service
• 1988
• Dell conducts IPO of stock, 3.5 million shares at
  8.50 each

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Milestones (Continued)

• 1990
• Manufacturing center opened to serve European,
  Middle Eastern and African markets
• 1993
• Dell joins ranks of the top 5 computer makers
  worldwide
• 2000
• Company sales via Internet reach 50 million per
  day

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Who is Dell, Inc?
Judy C. Lewent Board Committees Compensation, Fin
ance
Alex J. Mandl Board Committees Finance (Chair)
Michael S. Dell Chairman of the Board 10.6
Company Ownership 10th Richest Person in the
World Net Worth 13.0 billion University of
Texas Austin Drop Out!
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Products Services
Desktop Computers Notebook Computers Servers
Workstations Software Peripheral Products
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Net Revenue by Products
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Industry Market Share
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Financial Ratio Analysis
GROWTH RATES ASSESSMENT FAIR
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Financial Ratio Analysis
INVESTMENT RETURNS ASSESSMENT EXCELLENT
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Financial Ratio Analysis
MANAGEMENT EFFICIENCY ASSESSMENT EXCELLENT
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Financial Ratio Analysis
PRICE RATIOS ASSESSMENT FAIR
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Financial Ratio Analysis
FINANICAL CONDITION ASSESSMENT FAIR
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Financial Ratio Analysis
PROFIT MARGIN ASESSMENT FAIR
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Holding Period Return
Expected Price 42.43
Ending Price 33.98

• Ending Price Beginning Price Distributions
• Beginning Price

Current Price 34.84 (Underpriced)
NOTE Dell pays no dividends
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Free Cash Flow to Equity
(All figures in millions)
(Ke(DCF model) (Ke(CAPM) .2653.0429)
Estimated Growth Rate 23.27
Shares 2.523 Billion
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Cost of Equity

• Whats the Cost of Equity?
• Ke0(FCFE1/Shares0) G
• P0
• KeDELL 4

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Estimated Ke

• Due to the fact that Ke is negative and Dell does
  not distribute any dividends, we assume that Ke
  is greater than Kd we calculated Ke using Beta

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Beta Calculated, ß

• ßDELL COV(RDELL, RSP500)
• VAR(RSP500)
• DELL is currently underpriced and less risky than
  most companies in the same industry.

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Weighted Average Cost of Capital

• No preferred stock issued

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Capital Structure
Industry
Dell

• The 2004 capital structure and the industry
  capital structure pie charts are current numbers
  as of 8/04/2004 from MSN. Dell has slightly more
  debt than the industry average.

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M M Proposition Chart
Model 2
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M M Proposition Chart

• Looking at the three year WACC graph we can tell
  that this represents the Model 2 Graph With Tax
  M M
• The cost of capital decreases with the amount of
  debt
• We only calculated 3 years so if we did more it
  would probably be model 3

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Market Efficiency
Company Specific News
News Dell Inc. announced that Michael Dell will
transfer the title of Chief Executive Officer to
Kevin Rollins.

• Weak Form

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Market Efficiency
Non-Company Specific News
News US Fed raises interest rates by a quarter
point

• No Form

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Strengths Weaknesses

• Strengths
• Financial Ratios
• Return On Equity
• Return On Assets
• Inventory Turnover
• Asset Turnover
• Price/Book Value
• Direct business model and efficient supply chain
  management
• Stock is underpriced
• HPR is positive

• Weaknesses
• Financial Ratios
• EPS
• Quick Ratio
• Gross Margin
• Michael Dell owns approximately 10 of shares

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5 Year Stock Price Chart

• Currently its prices are climbing up slowly but
  steadily and expected to meet the mean target
  price of 42.

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Analyst Opinion

• As a group, we recommend STRONG BUY