IN THE SHORT TERM CPQ's pricing will have some impact on DELL. DELL will always be able to undercut CPQ, but nevertheless, you have to expect that aggressive pricing will have some effect on margins.
Once, CPQ's channel problems are solved (assuming that they can be), and CPQ realizes that it can't win a price war (which it already has to know), DELL's margins will return to normalcy with returns to higher pricing.
The wild card is whether or not the market will take the short or long term view, and if it takes the short term view, when will the long term view begin to prevail again.
I've seen speculation that DELL could fall back to $50-55. I'm not putting too much stock in this, but I'm not ignoring it either. Although I'd hate to see it, I think that it would be a very healthy launching pad for a move back up to $100. Right now, until CPQ's numbers are announced (an maybe even until DELL's next Q earnings), most investors are having to rely on DELL's assurance that the numbers will be hit. This, of course, is not exactly the solid foundation that many people are going to be willing to invest in with the CPQ news floating about.
The good news is that this might have a tendency to temper "upside surprise" expectations for DELL. Many investors might be happy just to see them hit their number.
Personally, I have no fear about DELL's ability to make its numbers. The again, I'm not the market.
Hang on tight for the long term! |
