DELL: Sleeping Giant or Tech Dinosaur?

Investing in Dell Inc. (DELL) stock used to be very profitable. Texas-based Dell revolutionized the way consumers purchased personal computers. Dell was in the right place at the right time, offering customers the ability to pick and choose what they wanted in their computers. This approach was rewarded by investors; Dell was once one of the highest fliers on the Nasdaq. Anyone who bought the shares in 1988 when they first went public and still holds them today is up about 20,000%.

Recent years, however, have not been kind to Dell. The stock is down about 60% in the last five years. Founder Michael Dell returned to leadership in a move many thought would be an elixir for a lost company. The longer-term picture was soon discovered to be just as dour as previously thought. Consequently, Dell’s stock has been languishing.

Large tech companies often transform from growth to value stocks as their businesses mature. Investors understand why Dell has been left in the dust by the likes of Apple (AAPL). What investors won’t tolerate is the fact that mature tech names like Intel (INTC) and Microsoft (MSFT) ended at or above where they were five years ago while Dell has lost more than half its value. At Hewlett-Packard (HPQ), Dell’s chief rival, shares have more than doubled.

But things may be changing. The most recent news is encouraging for the once high-flying Dell. Dell is redirecting its creative energy outside the plain-vanilla PC business. They recently purchased Perot Systems for $3.9 billion in a bid to generate more consulting and services revenue. In addition, Dell showcased a tablet PC prototype earlier this month. The company can bankroll such projects with more than $13 billion in cash. Bottom line, Dell is looking for more in technology and has the means to back their ambition.

Dell stock has climbed more than 10% since early December. Look for even more upside if Dell breaks above $15.25. There may be room to capture a 2-3 point move as it transitions into the previous trading range. For a short term gain in a solid stock, go with DELL. For a longer-term value play in tech, go with cash-rich but still growth-minded DELL.

Disclosure covering writer, editor, publisher, and affiliates: long AAPL. No positions in any of the ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.