It's not that Compaq was so bad as the 'King' of PC makers. It's just that a better business model came along in Dell which has unseated the King from the throne and ascended Dell to take a seat. The Dell business model was no secret for the past 5 years, it's just that's how impossible it was to change the way Compaq was doing business in such a large organization throughout the globe. This past quarter and the next quarter or two will complete the switch of Kings in the PC business.
Frank,
I worried an awful lot about that line in "The Gorilla Game" manual - as everyone seems to call it here - that advised to hold Princes and Kings lightly. I worried because I invested in Dell back in early 1995 for the very simple matter that the business model of selling direct made perfect sense to me for an Internet junkie who orders on the net all too frequently. Gateway and Dell were the new, young champions of that business model and I liked the chances.
Geez, I woke up 4 years later and couldn't believe the booty of shares and value that had accumulated in my portfolio by holding these two 'Princes'. Then I read the manual and started pacing at night because of that line 'hold them lightly'. Then the February nightmare of of my Dell stock dropping from 110 to the 70's and the bears screaming "the PC era is over, out and finished". Thank God I was skiing in the Alps and literally toasted my modem on the hotel's line trying to connect to my Fidelity account!
Since then, I've calmed down, I don't pace at night and I admire the chutzpah of the bears who are still claiming the world has no need for PC's that cost money. The same list that produced Gorilla candidate Siebel as the number one fastest growing company in America also produced Dell in the top 20 for this year. True, Dell is not a gorilla. It's always been in the royalty structure. Interesting how the term gorilla is used outside of those who have read the manual though. As a growth investor, as well as gorilla investor, the value chain theory makes a lot of sense to me. Those that perform the best in the value chain get some of my money. I only gave Dell a little back in 1995, but they have given me back a heck of a lot more. Now, I'm daring Qualcomm to meet or beat the return over the next five years. In regards to that value chain concept, that's why the Rambus, Intel, Dell, Compaq and all memory chip makers as well as PC makers possible shift to the faster memory standard makes sense to me. Whether the world needs the new speed of the Rambus and processors or not - the industry is creating it and causing us to 'need' it every few years. After all - they've got to make money don't they?
BB
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