Good afternoon Mohan,
you wrote ...the 'consumer space' has the lowest margin as far as I know,so I would think it is quite all right with Dell if they want to dominate the sub-cheapies
I think this is a commonly held view, and while the facts are correct I think the conclusion is wrong. It seems to me that the issue is turnover. Michelle, in a very insightful post pointed out that the "commoditization" of the server market is required in order for Dell's efforts to come to fruition. But that is the situation in the retail PC niche, so what drives the market is the efficiency of production and marketing, not technical innovation. And the more efficient the marketing, the higher the turnover.
I always like to use the analogy within supermarkets, whose commodity products like milk have low profit margins and high turnover, and exotic imported foods -- like truffles from France, with very high profit margins and very low turnover. Generally, the commodity on a gross profit per foot of shelf space basis is more profitable than the higher margined items.
But I agree with you in your belief that Dell is well positioned now with respect to consumer machines and does not need to go into the sub-cheapie market.
TTFN,
CTC |
