Thursday, February 26, 2009

Dell - Grinding Cash Flow

Dell reported after the close and while it was not a pretty quarter, earnings per share were better than expected and I suspect that cash flow was as well.

I covered Dell for over 10 years when I was on the buyside and it was always a cash flow machine, particularly its consumer division. My home office setup is fine, and that computer drives my wireless network, but since I use my laptop most of the time its actual computing power is used primarily by my wife and kids. That being said, it's a couple of years old, and I wanted to replace it due to the buildup of spyware and the like.

I ordered an inexpensive tower from Dell on Tuesday - no monitor, just the box. I ordered the standard config that they were pushing which I am sure they had readily assemblable. I just checked my order status and it hasn't shipped yet. I chose 3 - 5 business day shipping and the projected delivery date is March 18.

They hit my credit card the minute I ordered it and they still own the components, which if they don't actually assemble it until 2 weeks from now will have come down in price, since the inventory that they have on site belongs to their suppliers until they pull it out of the cage. They have my money, they have their componenets. Brilliant.

I'm not complaining but I'd be happier if they ship it tonight. Business is bad, yes, but that is a bona fide cash flow machine.

While I'm not recommending the stock, it is trading up a couple of percent in the aftermarket.

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