Dell Stock?

There is an article in the WSJ today that's fairly bullish on Dell stock. Here are excerpts:

Wall Street Journal: HEARD ON THE STREET: Dell Loses Lead, And Investors Can Take Heart
By CHRISTOPHER LAWTONNovember 10, 2006; Page C1
Dell Inc. lost its No. 1 position recently in the world-wide personal-computer market -- and investors have reason to cheer.
For years, the Round Rock, Texas, computer maker was a highflying tech company that churned out healthy profits and consistently grabbed market share with its low-cost business model of selling PCs directly to customers. Over the past year and a half, as that formula has shown its age, Dell has struggled to increase its share and maintain robust profits. It often slashed prices in order to move more PCs.
The price cuts hit Dell's bottom line hard. In August, it reported that fiscal second-quarter profit plunged 51%. Dell's operating margin, once the envy of the industry, also deteriorated. Margin, a measure of profitability that represents the difference between revenue and the cost of production, stood at more than 10% in the late 1990s and above 8% as recently as 2004. It fell to 4.3% in the most recently reported quarter.
Meanwhile, Dell shares have risen more than 9% on Nasdaq since fiscal second quarter results were posted Aug. 17, though the stock is still down nearly 17% for the year. Dell closed at $24.98 yesterday, up 80 cents, giving it a market value of $57 billion.
...
A Dell spokesman declined to comment ahead of next week's earnings report. In remarks to analysts during the company's last earnings call in August, Dell Chief Executive Kevin Rollins acknowledged that the company's pricing has been "overly aggressive." He said Dell would be more careful about its pricing but didn't want to lose market share.
Some are skeptical Dell is on an upward trajectory.
"If Dell just came out and said they are going to focus on profitability and not going to focus on share gains, it would help," says Ken Smith, director of technology research for Munder Capital Management. "They have lost share and become less profitable. I take whatever they say with a grain of salt." He says the PC industry is mature and there aren't huge share gains to be had anymore. Munder Capital Management, which manages $42.2 billion, owned 862,974 shares of Dell as of June 30, according to SEC filings.
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URL for the full article: http://online.wsj.com/article/SB116311547762619207.html

I wanted to point out a few things about this. I DO NOT LIKE MANUFACTURING COMPANIES!!! I don't understand why people always want to invest in capital intensive companies. The easiest way to explain how this is a bad idea is to look at the airlines (or today, car companies). The only obvious way for one to make a good long-term investment in a capital intensive company is to invest in its early years, while their market is growing, and their market share is also growing. Under those circumstances, companies are typically rewarded with high multiples, and earnings will grow at a rapid pace. The problem comes when the market matures, and the company is no longer able to steal market share. The company will probably irresistibly spend money trying to continue the days of old, which will generate horrible returns for investors.

To be fair, the same can be said about many types of companies, particularly in "growth" industries. For example, this criticism is probably very accurate if applied to Amazon.com, because they continue to invest in non-core businesses, and face tremendous competition and ever-growing capital expense needs. If capital expense as a portion of income or revenue must grow over time, the company is not a good investment.

So, to recap, I don't like DELL, or HPQ, or INTC (particularly Intel - INTC), or any company that must continually spend to stave off stiff competition in the face of a slow-growth market.