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Technology Stocks : Dell Technologies Inc.

DELL 122.55

+4.4%

3:59 PM EST

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To: Meathead who wrote (26438)	12/29/1997 11:09:00 PM
From: Jim Patterson	Read Replies (1) of 176387

The impact of this situation will actually be positive for Dell. You need another scenario to become bearish... this isn't it. OK. you failed to mention that a 7% sales decrease would hit EPS by 20% Now lets look at this some more. The AP os 7% of sales. Great. Now does that mean that 7% of Revs comes from that region or from the Companies in that Region. As the Big Korean Cherbols assess their perdigimate, Is it posible that they decide to cut back on Cap EX on other regions ? Does Hundi Buy Dell PC in other parts of the world ? Are Hundi's profits denominated ultimately in Korean Won ? You have to consider this. Now we are starting to get more info on the Semi Manufacture Eq companies. Spending is expected to be down 20% in the region for the next 2 years. Are any PC's involved with those Cap EX Dollars ? Last You are right most of the cost of building PC's is in COGS. More so than I thought. Here is another point for you to ponder. DELL's model is based on units growing @ 20-30% you probably know the exact number. Here is where that model breaks. component cost will hurt but not break the model. What breaks it. Dell is adding compacity. Dell spends a great deal of management recources to increase and add capicity. It is easy when all new capicity is utilized. and at 100% in DELL's case. If there is a slackening of demand in a region, that 100% utilization will dip. That is when the model breaks down. Suddenly the new capacity is a liabality (That means cost indstead of income) Then your inpenatrable Gross margins recieve a huge blow. Combined with the Mutiplier effect of Price competition Lower ASP's and missing revenue, EPS dissapoint big time. Or everything works out and no one has any problems at all. Jim

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