The real mystery is why DLJ upgraded Compaq and downgraded Dell. Cpq reports they're going to have $0 earnings with flat revenue with over 85 days of old unsold inventory, with a questionable fall quarter as well. Dell's inventory stands at around 7 days and reports no weakening in demand. I would imagine that a main factor DLJ is considering is Compaq's active in-your-face sales force (considering the price cuts) relative to Dell's. However, this has been a non-issue over the past twelve months. Don't see why it would be an issue now. PAs (purchasing agents) at businesses have preferred Dell's methodology over Compaq's. Compaq has come across pschologically, at times, as the "used car sales department" whereas Dell has been selling only "new vehicles". Despite much effort on Compaq's part in Asia, they've lost market share to competitors there. Dell, on the other hand, is just beginning to exploit their BTO model in Asia. My guess is that Asian's (especially China) will take to the BTO model very quickly. Asians, in general, are much more self-reliant technologically than we in the Americas. There is also a localized computer concern in Russia (actually based in Germany) which is employing a Dell type BTO model and having success. It is reasonable that Dell would also have success in Russia utilizing it's model should it decide to fully tap this market. For several reasons, it's apparent analysts have not fully appreciated the BTO model. Their own model states than in a super-heated competitive environment, BTO fails against a superior sales force with WOWY price cuts. The problem, here, though is that the "superior sales force" has been inferior to Dell and price has been variable dependent on past performance/service; price hasn't dominated as analysts have expected (i.e, Digital is still in business aren't they?). Dell's own force has been for technologically efficient (witness the service polls) than the salesmen down the street from you neighbor and around the corner from your aunt-in-law.
Relative to past success, CPQ could still be overpriced and Dell underpriced. |
