Man, maybe you should have bought a Dell

This is the main conclusion from today’s morning letter, which you can read to register to receive in your inbox every morning, along with:

Every week is full of surprises when you’re dealing with the media.

I think that’s part of the adrenaline rush you get when you’re in the game.

That’s why I was personally surprised by two things this week.

First of all, not everyone 30 and under has ever heard of Compaq.

Just a quick reminder: they made big desktop computers that used to plug into a telephone jack that plugged into a wall socket and then connected to the world wide web (or internet…).

Once everything was hooked up, you turned on the Compaq (the most popular model was the Compaq Presario) via a switch on the back, logged into a so-called AOL (America Online) account, listened to the loud technical noises coming from the computer, and poof, you were magically connected to friends you’d just seen in school and complete strangers in faraway lands.

Then you started posting sad songs on your MySpace account because you probably broke up with your high school sweetheart for the ninth time in a week (or was that just me…).

Hewlett Packard, now split into PC maker HP Inc. (HPQ) and AI server company Hewlett Packard Enterprise (HPE), acquired rival Compaq in 2002 for about $19 billion. (Also check out my recent conversation with the CEO of HP and another with the CEO of Hewlett Packard Enterprise.)

HP discontinued the Compaq brand in 2013.

That part of the history lesson is complete.

The next surprise for me this week is that not everyone under the age of 30 remembers the iconic “Dude, you’re getting a Dell” TV commercials. These commercials dominated the airwaves when I was in college, and I would argue they put Dell on the map with consumers who barely knew how to use a computer.

I don’t know why the commercials made an impression on me, but they did.

All in all, they reminded me that I was now getting closer to a gray beard at work. I don’t have a real beard; it just means you’re an elder statesman. It’s a weird place to be, but you can’t outrun Father Time — not even my bionic self. I envy the youth.

Now that I’ve explained all that, I actually have a surprise for YOU! Namely, do you have Real did you know that dell has completely transformed itself? Read the company’s annual report here and scroll down.

Dell was founded in 1984 by Michael Dell, then a student at the University of Texas. It made PCs, lots of them.

The story continues

Over the years, the company has transformed into part PC maker, part tech player that is an integral part of the fabric of the global tech infrastructure. Think servers, storage and other components for entire countries and companies that I won’t bore you with.

The company is long past the integration of its massive 2016 acquisition of EMC.

I got to spend 25 minutes with Michael Dell this week in NYC at the Citi TMT conference (video above) and was truly blown away by what the company is working on. Was I surprised, period? No, because I still read every earnings report and earnings call transcript from the company. But I was a little surprised to hear just how deep the transformation at Dell is.

On Friday, S&P Global announced that Dell will join the S&P 500 on Sept. 23, replacing Etsy. The move sent shares soaring in extended trading, as the company will soon be included in index funds that track the S&P 500.

It is embarking on its latest transformation for the age of AI. Dell said it brought in $3.1 billion in AI server sales in the second quarter, nearly double the $1.7 billion it brought in the previous quarter.

Revenue in the company’s Infrastructure Solutions Group rose 38% to $11.65 billion. AI revenue is captured in this segment.

Dell’s Client Solutions Group — which includes sales of PCs and laptops — saw sales fall 4 percent to $12.41 billion. Consumer sales fell 22 percent to $1.86 billion, while the commercial business was flat at $10.6 billion.

Dell tells me the AI ​​PC uptake has been delayed a bit, but it has over 200 million Dell computers (aka the installed base). It needs the AI-powered replacements and that money will be rolling in soon.

“Organizations see this as a historic opportunity to make their businesses more productive and efficient (with AI), while at the same time reimagining their businesses with all of these capabilities,” Dell told me.

Another surprise – at least to me – is how cheap the company is valued by the market.

Shares of Dell are trading at a 13.5x forward PE multiple, according to Yahoo Finance data, well below the S&P 500’s 22.5x. I’m not saying the company should be valued on par with Nvidia (NVDA) or even Salesforce (CRM). But assign Dell a reasonable 15x PE multiple to a reasonable fiscal 2026 earnings estimate of $9.40 per share (which translates to roughly 20% earnings growth), and you have a stock worth $141.

Dell’s stock is currently trading at $107.

Head scratching for a company that clearly plays a key role in the AI ​​future. Perhaps it’s a function of its PC exposure.

Before I head out to shop for an AI PC, I wanted to quickly mention that I’ll be live on Yahoo Finance on Monday and Tuesday from the Goldman Sachs Communacopia + Technology Conference at the Palace Hotel in San Francisco. This is one of my favorite conferences to cover each year, and we have a ton of big ticker-moving interviews planned. So tune in, because your net worth could depend on it.

I’m sure Dell will come up somewhere in the chats too, guy.

Three times a week I have insightful conversations with the biggest names in business and markets on Yahoo Finance’s Opening bid podcast. Find more episodes on our video hub. Pay attention to your preferred streaming service. Or listen and subscribe to Apple Podcasts, Spotifyor wherever you find your favorite podcasts.

In the episode of Opening Bid below, Marija Veitmane, head of equity research at State Street, shares how she successfully picks technology stocks for her clients.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and further LinkedIn. Tips on deals, mergers, activist situations or anything else? Email [email protected].

Click here for the latest technology news that will impact the stock market

Read the latest financial and business news from Yahoo Finance