Since I'm still holding all my shares, I sure hope you're right. But I no longer only look at the positives, I concentrate more on what could be the negatives of a company. This way I'm more in tuned on what the downside could be.
If the price of a NAS system is $1 and EMC drops their price to 75 cents then it will make it a harder sell for NTAP and if NTAP starts to lose sales they will have no choice but to get down in the gutter with EMC.
I'm not saying it will happen but that is one of the downside possibilities of EMC's actions.
I agree. It could be ugly, but right now EMC is just talking. Still, this is a problem many companies face. If an ISP lowers its price, the competitors either lose market share or lower their price as well. However, if Network Appliance doesn't have enough barriers or differentiating features to separate their product from a competitors', then this isn't a company i want to own.
Look at Microsoft, Aol, eBay, Intel, Siebel. All these companies have raised prices in the past. Their competitors offer products that are cheaper yet still can not gain market share. If Network Appliance can not do the same, then they shouldn't be included in the list above.
Most would consider Dell in a different category than say Intel, Siebel, or Microsoft. However, Dell had a unique business model allowing them to have the lowest cost product, so they were the ones putting pricing pressure on the other OEMs.
It's already happening. EMC's gross margins were 47.0% in 2Q01 (ended 6-30-01), compared to 57.9% in 2Q00.
Although i think the CEO of EMC said that margins will go back up once the economy recovers.. |
