Value Geek

Dell: Where's the Competitive Advantage?

Dell DOES have a moat, and its the same moat that Walmart has. Dell doesn't need to diversify into software or services, it just needs to maintain and increase its market share in PCs and laptops. Walmart was derided by analysts for years while it pursued the strategy of using razor-thin margins to build market share. Have you taken a look at Walmart's stock price recently?

In the end, consumers want goods to be available at all price points, from the luxury top-of-the-line products (Apple/Alienware/Neima... Marcus), to middle-of-the-road prepositions (HP/Target), to minimal-quality value products (Dell/Walmart). While everyone can run a global supply chain and build computers to order today, foreign PC manufacturers do NOT have a competitive edge because computer assembly is not labor-intensive. The major costs are the CPU and the OS, and Dell has volume discounts on both.

In the past, Dell has imitated the Walmart strategy too aggressively, and has cut even essential expenditures like customer service and R&D, which resulted in a loss of market share. Michael Dell is in the midst of correcting these mistakes. I bet that 5 years from now, Dell will still be providing value computers to millions of customers around the globe at razor-thin margins, and will be making a decent profit doing so.

ViroPharma: Lev Acquisition Appraisal

Genedr : FDA will almost certainly approve Cinryze, given its wide use and excellent safety record in Europe. From the press releases I've read, it would appear that the acquisition is not contingent on FDA approval, since there is an additional payout on final approval, and Viropharma has already spent $20M buying up some Lev shares. I think there is an extremely high probability that this acquisition will be consummated. Certainly, Lev's current stock price suggests that arbitrageurs have a similar view.

The very bullish case for Lev rests on the outside chance that C1 INH will be helpful in myocardial infarction, which is of course a huge market. I believe that to date, only animal studies have taken place, and the results are conflicting, so this application is very very speculative and undeveloped.

Intel's Anti-Trust Woes

To Peter Nguyen : I too believe that AMD will not become bankrupt. However, I think there is a good chance that the company will be forced to sell shares at a very unfavorable price (say $3-5) to raise cash due to its high cash-burn rate, resulting in dilution of the existing shareholders. Financing with banks is unlikely given today's financial environment. On the other hand, a doubling of AMD's stock to $16 is possible if the price war ends and AMD regains profitability; this scenario depends very much on Otellini. I personally think that $7-8 is a fair price for AMD given these two possible scenarios. As for INTC, I think that it is fairly priced given Intel's current earnings, but I think earnings are going to dramatically climb once the price war ends and the Atom takes hold (and the Atom is already selling well enough to for customers to experience shortages - see www.pcworld.com/busine...).
But your central point is well taken: just because a company is very good operationally doesn't mean that it's stock is good value; it all depends on the price of the stock. I wasn't trying to set a specific price target for the stock, but was just pointing out that the anti-trust issue is probably just more white noise.

To user 20710 : The well-developed US economy doesn't have any "strong" monopolies (and it should not), only "weak" ones. Microsoft has to defend its Windows OS against Linux and Google Docs, Intel has AMD, Walmart has Target and the rest of the retailers. The source of their monopolies differ : Windows users face high switching costs and less software choice when turning to another OS; Intel and Walmart have huge economies of scale that allow them to undersell their competitors whenever they need to. Their dominant market shares and huge cash reserves are the source of their permanent edge in competitiveness. As long as they do not let their market share erode, no government or major customer/supplier will dare snub these companies seriously, because the threat of market disruption is very real. Such a semi-monopoly can take even a serious hit without permanent harm, as long as management even has half a brain. Intel managed to lose its technological lead through sheer carelessness, but regained it (albeit by sacrificing 1-2 years of profitability). I DO know what a natural monopoly requires (having done Econ 101) ... while Intel is not a natural monopoly, it has certain characteristics of one and is a "semi-monopoly".