MUST READ/ COMMENTS? "Reasons for strong demand:"
<<"Do these guys really know why PC demand's still very strong?">>
1) Current world-wide sales are just at the tip of the iceberg.
2) Moore's Law
3) Lower manufacturing costs = lower prices = greater demand
4) Specific to DELL-- Dell continues to carve (not chip) away at the market share of its rivals. Even if the overall market slows, Dell's percentage of market share will almost definitely continue to increase.
If buyers of PCs become and remain convinced that Dell's products are top-of-the-line, then the other box makers are in trouble. This is probably why we see CPQ scrambling to redefine its business as sort of a smaller version of IBM. CPQ can compete with IBM in the vast array of products, making PCs less important to the overall business, thereby reducing the fallout from Dell's increased market share.
I believe that as time moves forward, we'll begin to see Sun (in workstations/servers) and Gateway (in PCs) become Dell's true rivals in each of these two segments. Sun is obviously better positioned than Gateway to mount a successful campaign. But being number two, when you're GTW is not all that bad. Indirect marketing is only going to cater to first-time buyers (generally), and as there are fewer and fewer first-time buyers, the market will dry up. Indirect marketing will therefore die a slow death, or at best be permanently confined to low-end, low-margin boxes; exactly what Dell could care less about being in (see <$1,000 PCs).
Dell must continue to build and service their products at the same or better level than current in order to capitalize on this opportunity. For all of this talk about being both an indirect and direct marketer at the same time (see CPQ), I say there is no way that this will work, and make CPQ as profitable as Dell at the same time. This, again is why CPQ is diversifying; it can't compete over the long haul head-to-head with Dell.
In defense of CPQ, I would say that while they missed the boat (and fell off of the pier) on direct marketing, they did realize that relying on PCs to fuel THEIR growth was untenable. They've made a change that will move them further away from direct competition with Dell- a war they would eventually loose. It's much easier to compete with IBM, in areas that Dell does not have a presence. Prediction: Look for CPQ to buy a software firm next (see IBM/Lotus).
Prediction #2: You can forget about Dell acquiring anyone (else's problem). Dell will build it themselves if they believe it is necessary for expansion. That's the beauty about being that far ahead of the curve.
Prediction #3: It is past the point of Dell climbing to the top. They're there, even if the numbers haven't caught up yet. Now, Dell must focus on staying there. Remember, there's only one place to go from #1... I'm not concerned about a loss of focus at this point. I predict that your money is safe in Dell for at least the next six (6) quarters, and probably much further if all goes well. Keep your hand on the switch.
Prediction #4: Gateway is on the verge of implosion. This year will be pivotal to this company either being a big guy or a little guy. They must continue to grow, and they need to have growth rates in between CPQ and DELL. |
