Agree @Solvetheriddle, that is a compliment, and growth is an issue while margins are unlikely to expand significantly from here.

The idea of going OS for growth doesn't thrill me.

They have strong vendor relationships which would help but I think their strong customer relationships built up over decades is a source of moat - one they won't have in foreign markets. They've done well in NZ taking market share via acquisition, so that's the likely path they'd follow OS to buy those relationships - the IP of customer lists.

I'm reminded of the Ansoff Matrix - an OS move would be the 3rd layer of hell / risk - Taking existing products into completely new markets.

This is all pretty academic but I find it a useful frame when assessing the riskiness of growth strategy for a business.

They've done all of Layer 1 they can do it seems.

Layer 2 is where they've been successful in developing security as a product extension recently and the shift to software that has been somewhat forced upon them.

Layer 3 is the next source of growth - it's higher risk but DDR has historically shown an owner operator mindset when it comes to managing growth and risk. Still ASX businesses going OS in search of new frontiers to conquer has a checkered past at best...

Disc: Held

@Solvetheriddle @Slomo - I had the same thought about market share. However, might that lead to more pricing power?

I am strictly holding $DDR as a recovery play, which will be driven by the macro-business environment improvement, and (hopefully) some more easing of interest rates. (It is one of my only holdings which is not a long term holding.) If economy goes backwards, need to revisit!

I got into it because I was getting disorientated with the outlook for some of my retail holdings (which I exited), and felt $DDR was relatively beaten up, with an end market I understand better.

What I heard in today's presentation to support this mini- thesis?

• As a strong business, they have increased market share in a difficult year, which should assist future margins
• Some nice vendor wins, e.g., Adobe
• Falling concentration of vendors continues
• The continued strengh of software
• PC refresh - talked about for a while - but happening in the next buying cycle
• AI deployment - e.g., 10% AI PCs
• Ongoing cyber thematic still strong
• Successful initiative of pushing into retail

Debt is higher than I'd like, but they are also carrying a little excess cash, and excess inventory, and hopefully easing rates will come through as the year unfolds.

Evidence that improvement is starting - conseutive improvements called out in Nov < Dec < Jan ...

While it is a fools game make a 12m Price Target prediction, I could easily see this gettng back to $12-14 if the macro remains supportive. So, it ranks well in my portfolio at the moment.

Good summary as usual @Slomo and @mikebrisy

I would add that I was a bit surprised at Vlad's comments around them being the market now and how hard it is to get double digit growth when you're doing $3 billion in sales etc. He sounded a bit more conservative than usual there. Hopefully PC refresh and AI are big winners for the next couple of years. But it's possible their average multiple comes down a bit from now on, if enough think growth is slowing.

I also thought Mary wasn't quite as strong as usual in her comments about the debt and that they might need to tweak the strategy around payout ratios vs reducing debt if interest rates don't come down more. Personally I'd be fine with reducing that risk a bit but I doubt the market would love a declining dividend.

Going to be an interesting next 12 months.

@mikebrisy do you think the PC refresh will be as big as the last one they talk about?

My thoughts on this are that the growth in processing demand for mostly standard office based PC's feels like it peaked around 4-5 years ago?

I've noticed much less of a redundancy feeling on 4-5 year old hardware then what you would have felt 5 years ago.

E.g gaming power unless you want to run 4k triple screens a mid range machine serves you well and I think similar for office based P's.

The demand requirements for the ms Office suite and even most drafting programs (solid works / inventor ) probably don't need a heap more power than they did in the past meaning you can really drag out the upgrades until they are needed.

Some of it is even cloud based now and you don't need the processing power locally.

Any big company I've worked for always seemed reluctant to do upgrades in big volumes, you had to kill the crappy PC you had to get another one. Only other way was if you were hired as an increase in the headcount then you got a new one..

They never seemed to view slow machines as a productivity issue.

Disc, not held but thought about it for a while..

@Schwerms I am aware that some surveys of businesses predict that 80% expect to refresh in 2025, and 70% of consumers expect to in the next two years.

So, raw power seemed to peak a few years ago (e.g. with Core-i7 series) and since then there has been more focus on processing efficiency. More and more processing is being done in the cloud, taking some of the load off the end device.

Counterbalancing that, is that many buyers will specify equipment that is AI-enabled, That maybe won't be massive this year, but with increasing focus on AI exploitation perhaps that will take off in 2026. I don't have an informed view on how important it is to have an AI-enabled device. Some of my longer searches I am happy to have running while I multi-task on another window. Not sure how many business owners are switched on to this. As ever, there will be an adoption curve, and I think it will be over several years.

And then of course there is the much reported enforced updated to Windows 11 when Windows 10 support stops is another driver. A US survey last year in September reported that 82% of businesses were yet to transition to Windows 11. However, Microsoft is apparently offering and Extended Security Update until Ocptber 2026, which will but time (from a security standpoint at least) for firms to transition over.

Again this backdrop we still have a lot of uncertainty in the business environment and interest rates are still technically restrictive, so many firms will be taking an aggressive approach to deferring investment.

I'm not close enough to end user experience and so have just read the same industry reports as everyone else.

On balance, I am expecting strong years in both 2025 and 2026. If downside risks materialise, I just see that as pushing the cycle back, So that's why my short term thesis for $DDR is that it should do well over 2025 and 2026. This is probably the only business in my portfolio where I am in for a good time and not a long time. But we'll see,

But like I said, I am no expert, and am just basing my views on the same public domain reports we all have access to.

On the note about the potential upgrade to windows 11, I don't think you necessarily need new hardware, if the computer is able to you can update the existing machines, the minimum specs are fractionally higher for windows 11, looks to be only a small processing power increase and 4gb of ram vs 2gb.

I haven't done much with the AI side of things, I was under the impression most AI related stuff would still be search engine based or stand alone programs you could put on existing systems? Out of curiosity what processing power-intensive program are you running searches on? I didn't consider this and that could be a big driver if it has minimum requirements well above existing hardware.

@Schwerms these are both good points and, for both reasons, the near-term replacement will only apply to a minority portion of the potential opportunity.

So, on 10-to-11, buyers will need to think if the increased memory and processing power requirement tips them over the edge to replace a fleet of equipment that is maybe 3-6 years old. Might that bring forward a routine decision by 6 months or 12 months or more?

On AI, I've no doubt the majority of businesses will look at the cost benefit of AI-enabled versus plain vanilla repalcements, and for some the choices are:

1. Make do with what we have, patch and upgrade, and if we are using AI - well its in the cloud anayway. Let's revisit the decision next year.
2. We need to upgrade this year, but the case for incremental cost of AI-enable equipment doesn't stack up, so we can review on a case by case basis when we need it, but for now, we'll go with lower cost non-AI equipment.
3. Make the AI switch now. Equipment is for the next 4-6 years, and increased AI-embedded in software running on the machine is going to increase rapidly over the next 1-2 years, so we want to be future ready. Plus, we're big users and want our workers to be as productive as possible.

As a straw poll, I've had two conversations this morning with people in my network. One dropped his laptop over the weekend, and is upgrading to an AI model. Another is getting peeved with the reliability of their curent laptop, and are prematurely replacing. They are also looking at AI-enabled next. (But note to self - my network is not representative of the laptop buying population!)

The way I think about the opportunity is that it's two or three gentle tailwinds, blowing concurrently, for a few years. Or in other words, BAU with some extra ooomf behind it.

However, for a relatively mature business like $DDR, that kind of industry dynamic can make a significant change to the EPS growth trajectory for a while, to which the market will potentially over-react (as it often does). That's my short/medium term thesis, basically.

Not an owner-operator, but your anecdotal example totally checks out and is a small taste of what's to come for the job market in the years ahead.

I don't know if anyone has a good answer to the Q - what are the displaced workers going to do (as there probably won't be enough such jobs going around as AI increasingly proliferates enterprises)? And if we are expecting mass dislocations in the workforce of this nature, what is the government/policy response going to be? It looks particularly fraught with heavily indebted household balance sheets.