Perhaps I misspoke about the cash burn rate....that was ASSUMING they sold for a loss. Of course, the likelihood is none of these guys are selling for a loss YET.
If Dell sold for a loss, and sold 10% more computers than CPQ, and CPQ sold at cost (or slightly better loss than Dell), then Dell would certainly burn through cash much more quickly....though it would take a long time before it made a substantial impact.
Still, reviewing the airline price wars, these companies sat on piles of cash that they burned through to grab market share. It's not a good battle to engage in...in the end, Continental was lucky to survive and, in the end, thrive, but look at all the airlines that went under or are holding on by their fingernails (Delta, TWA, Pan Am, etc). These were the IBMs/CPQ/Dells of their industry. And their price battles opened the doors for the upstarts to kill them. |
