Without any catalyst driving demand for new equipment purchases, I expect that Dell will continue to trade at or slightly below current levels. But following the Microsoft Windows Vista launch -- Microsoft’s most important OS introduction since Windows 95 -- demand at Dell will surge from both retail and small business customers.
Demand is seasonally slow during the first quarter for enterprise customers to upgrade hardware, servers and software applications. I expect things to slowly improve during the second half to end of 2006, coinciding with the launch of Vista, which will bring multicore CPU support on the OS level and a number of enhanced GUI and performance features for Windows users. Intel and AMD roadmaps are both concentrating on introducing multicore CPU products to the mainstream and enterprise markets.
Why is this important to Dell? We can draw historical references from the introduction of Windows 95 and the Intel Pentium architecture. The release of Windows 95, Windows NT 4.0 and Pentium line of CPU products from Intel created significant demand from retail and enterprise consumers. In the mid 1990’s the new resource-intensive OS paired with a new hardware architecture meant users would be forced to upgrade to take advantage of emerging new 32-bit software applications.
What I believe we are seeing with Windows Vista and multicore CPU products is a repeat of the Windows 95 and Intel Pentium architecture combination. With multicore OS level support and nearly all new CPU products from Intel and AMD becoming multicore products, the end user and enterprise user will be forced to upgrade to obtain an acceptable level of performance or to take advantage of new applications available on Windows Vista -- the most resource intensive OS introduction since Windows 95. For a mature and well known computer systems manufacturer this can only translate into higher sales due to new demand.
I see the current drop in Dell price as an opportunity to pick up shares before demand starts to pick up in mid to late 2006. I expect to see Dell top $40 again within 6-12 months. I like Dell at under $30. If my prediction works out this would mean a gain of 33% or greater within 1 year.
DELL 1-yr chart:
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