Dell Teaches the Value of Listening/Reading Conference Calls

by hihih222

“In the Q&A, they were asked why they weren’t reducing full year estimates given that “you need to generate 80% of your EPS in the next 3 quarters, which is higher than what you’ve done in the past.” Management conceded the point but wanted to look at the “competitive environment” before giving estimates for the year. To me this means guidance will be revised lower in August, management just wanted to be sure before they gave the signal.”-My post on Dell on June 27th…

8/22/12-Dell is down 6.5% on a downwards earnings guidance revision.

This required no extra insight on my part, I really let the analyst asking the question do all the work. Just by reading the question and answer, I knew that earnings guidance was likely to be revised lower. It’s the same way I know that OCZ Technology is likely to have a sales beat in their next quarter(not a buy recommendation, OCZ sales beat doesn’t necessarily mean it will jump). By simply reading the conference call transcript, I have an edge on most of the crowd.

Conference calls are also where I finally speak to management(or at least management speaks to me) about the business rather than just reading about it in an annual report. Management finally discusses their view of the industry, the future, current operations in reality rather than just on paper, and gives you a lot more information than you can find on simple SEC filings.

Lesson Learned: Always read/listen to the conference calls.

Note: Seeking Alpha and Morningstar are the best places I’ve found to find conference call transcripts, although I assume there must be more. You can always get the audio from the company website, I’m just usually too impatient.

Other Note: After both Jim Chanos(short position) and David Einhorn(sale of long position) have looked poorly on Dell, I’m beginning to get antsy. Looking at Jim Chanos’ short thesis, I’ve realized that they key to Dell’s valuation is whether or not goodwill gives a correct value to R&D and other intangible assets from its acquisitions. If goodwill is impaired, it could send Dell down…a lotSo I’m no longer nearly as confident in my idea of buying at $9-$10.

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