BBG -
RE: It's over for CPQ...
This kind of talk is just silly. This is not a football game. I have been saying for 2 years that CPQ and DELL are going in different directions. Here's some summation. If you are interested you could go back to fall of '98 and read some of my thinking on this.
To: Captain Jack who wrote (69861)
From: rudedog Monday, Oct 25 1999 10:58AM ET
Respond to Post # 69890 of 69896
Jack -
I suppose losing mkt share is another plus????
Go back to my posts from October and November of '98. At that time I predicted that CPQ would take a defensive position in the desktop market with the goal of not losing share, which would probably land them as #2 in NA within a year. Why would they do that?
1) allows them to improve margins by concentrating on "systems selling" and value add rather than units at any cost
2) Probably maintains #1 position WW or at least a very strong #2 in PCs
3) Shifts perception of the company upscale, improves overall margin and ASP
I also predicted at that time that IBM and HP would be the losers in that space and would continue to drop back in the pack.
Amazingly enough, it looks like CPQ actually executed on that plan. BTW the scuttlebutt at that time was that the plan was proposed by Rosen and opposed by EP. I frankly think it is the right way to go and could care less whether CPQ is #1 in PCs as long as they are improving profitability and growing the business. They didn't invest $10B to grow the PC business - their plan for nearly 5 years has been to shift to a full-service IT company while not losing the PC base.
I am very comfortable with what is happening. I would actually be much more disturbed if after all of the pain that CPQ went through to set up for a change in their business model, they went backwards and started back down the road to a painful battle for PC share.
Perhaps I should go back and compile all of those posts... CPQ appears to have actually developed a 5 year plan and executed on it, despite a complete shakeup of management and all of the other turmoil.
To: Mao II who wrote (69852)
From: rudedog Monday, Oct 25 1999 10:38AM ET
Respond to Post # 69887 of 69896
M2 -
DELL has been on a path to take the lead in US desktops for 18 months. I predicted in September of '98 that they would do this in fall of '99. The revised 2Q IDC numbers showed DELL with a narrow lead with stronger growth which implied they would lock in #1 in 3Q. Anyone who is surprised by this has just not been watching for the last few years.
As a DELL shareholder, I am more troubled by DELL's inability to bring up their numbers outside of their "English-speaking" markets. They are now bigger than CPQ in North America and the UK, and that has been where most of their growth has been. In Germany, France and the rest of Europe CPQ has more than twice DELL's share, and despite the "opportunity" presented by CPQ's disarray, DELL has failed to execute there. Likewise Asia, which has been a focus area for DELL, has not grown much.
The IDC PC numbers are pretty much what I expected. As far as CPQ goes, they are interesting but not definitive, since CPQ now has nearly 55% of revenue in other than the PC sector. DELL may drop back to #2 in 4Q as this is typically a very strong quarter for CPQ because of holiday retail sales. That will probably happen but I would expect DELL to get the crown back in 1Q00.
As victor said, it will be interesting to see how DELL does as the leader, not the follower...
To: Windseye who wrote (69888)
From: rudedog Monday, Oct 25 1999 11:20AM ET
Respond to Post # 69894 of 69895
Doug -
No - having ridden those puts through Intel at 65 I'm still holding. Could have made a decent profit on both sales as those were at 3 and change last week.
Did get out of PFE (15,000 shares) at 39 1/2 this morning, based on a hot tip from my trusted diversification advisor. I'm practically turning into a trader.
I also got 400 contracts of CPQ jan 20 '01 LEAPs - ZKPAD - at 4 1/2. I will go for more if I can get them under 5.
I am really delighted by the IDC data. A big rise in CPQ units would have almost certainly meant a big panic sales effort, bad for profitability. A big drop would have meant failure on routine field execution. But where we came in was "Just right" IMHO to indicate that MC's hand on the tiller is steady. I feel strongly enough about that to place a bigger long term bet.
To: Mao II who wrote (69889)
From: rudedog Monday, Oct 25 1999 11:30AM ET
Respond to Post # 69895 of 69895
M2 -
See my other post. I think CPQ is concentrating on cutting the excess costs out of their PC delivery chain, getting the sales force to understand systems sales rather than box pushing, and cleaning up their distribution to improve customer sat. I don't think they are, or ought to be, concerned about what DELL is doing, let alone obsessed. I have said for 2 years now that CPQ and DELL are moving in different directions. The boys from Round Rock are having a hard time letting go but I don't think CPQ has that problem.
Lets assume that it would cost CPQ $100M for each point of share gain against DELL above the "maintenance" position. Would you think that was a sensible investment? That represents about .05 in EPS for each point of share.
There are better ways for CPQ to spend that money - or conversely, to use it to offset costs which will actually grow the business. |
