Hmmm, OK, I guess I was thinking of the contract manufacturers (Sanmina, Foxconn, Jabil Circuit, etc.) when I said a PC gross margin is 5%. Perhaps it's higher than that, I'm not up to speed on electronic hardware gross profit levels.
Storage, networking and servers. This is a growth area? If you say so. My memory in tech was that the chip and software makers grabbed all the gross profits, and most of the big systems guys did not.
CSCO is the king of networking. They also were big in the 90's. I don't know what's going on with them today, but I don't think they grow sales much.
Dell bought EMC (storage). Oracle bought Sun (servers). NTAP remains independent, and is doing OK. If you bought NTAP as a growth story, maybe you'd have a chance.
Dell? They package other companies' (Microsoft, INTC/AMD, various chip makers) high margin components into systems, and then sell the system. Not the big profit in that, but I suppose some company will do well since it's such a huge market. Why will Dell do better than system level competitors who are also making servers, storage and networking? That's the crux of the "invest in Dell" story.
Why is Dell better at buying high tech components and making them into a system than the numerous other companies that buy the same high tech components and make them into almost the same system? HP enterprises does about the same thing as the Dell segments you like. Why is Dell better than HP enterprises?
Systems hardware is generally NOT a good area of investment. The high margin sales and moat are in the components and software, not in the box makers. |
