Jim -
Here's my reasoning, which I have posted before. Virtually all of the majors, DELL included, contract for a portion of "production" with the DRAM vendors. They do this on a cost-plus basis. This gives the DRAM vendor enough base production to do reasonable line scheduling without the need to inventory all that production, something they were reluctant to do given the overproduction of recent years. The DRAM vendors then gave very favorable terms for those contracts. This is much like what the airlines do - a certain amount of seat capacity is sold at low rates - enough to assure that at least the fuel and running costs are covered - then the rest is sold at higher prices.
DELL became especially vulnerable because they happened to have contracts which expired in summer of '99, at a time when they anticipated that they would be shifting a substantial amount of 2H99 production to RAMBUS. As a result, they contracted for less base production of DRAM than they would have if the mix had not included RAMBUS. HP and CPQ did not plan on introducing any RAMBUS based products until late 1Q00, so they had no reason to change their mix. When Intel dropped the ball on the RAMBUS support chips and MB design, DELL was caught holding the bag and had to go on the spot market. At exactly that same time, CPQ and GTW closed deals with Micron (the memory one not the computer one) to increase their base production contracts.
I suspect that one of the reasons DELL did their deal with Samsung on LCDs was to get some relief on DRAM.
I believe that DELL was impacted for a shorter duration than the worst case scenario and was back in normal status early in the current Q, so I agree that they are not likely to show any effects in the current Q. But for the above reasons, I doubt that CPQ was much affected, and would be surprised if GTW had memory problems given their micron deal. IBM of course is a memory supplier so they could meet their own needs if necessary and presumably would not gouge their sister divisions. HP made some noises about memory problems but they showed impact more in their high end Unix lines, so I think the problem was really their Unix product offering being hit by SUNW, and not a supply problem at all.
My info came from the supply side (i.e. discussions with some of the memory suppliers) so it is really conjecture but that was the basis for my assumptions. |
