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Technology Stocks : Compaq
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To: rudedog who wrote (76793)1/27/2000 8:10:00 AM
From: JDN  Read Replies (2) of 97611
 
Dear Rudedog: OK as an accountant I will explain it to you. DELL business plan calls for basically just in time inventory. That means when component prices are falling Dell can quickly drop the PC prices, pick up market share and still maintain their margins. However, when component prices are RISING just the opposite happens. They have to raise prices faster than the competition (if they can) and if their should be a little lag in components (spelled microprocessors) they either have to forego the sale or switch in an upgrade at no additional price. I would say, over the next cycle of rising prices that Dell will now at a minimum no longer have a competitive advantage and at a maximum may even perform worse than CPQ. Then, to top it off for the whole box makers community DELL got the public used to continually dropping prices, wont be so easy to put in continual increasing prices. Bad for us all. Got it!! JDN
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