I believe there's a lot more CPQ excess inventory out there in the distribution channel than 200,000 units. See my earlier post on this subject:
techstocks.com
Despite this, IMO DELL's sales won't be affected very much by any fire sale by CPQ. There are a lot of factors which lead me to this conclusion, here are two:
(1) DELL CFO Tom Meredith said in the Monday Bear Stearns CC that IBM, CPQ and HWP have been offering "DELL discounts" in PC markets worldwide for over a year, but it hasn't dented DELL's sales one iota.
(2) DELL's ASP for its range of desktop units is $400-$500 more than CPQ's ASP, because CPQ makes a lot of sub-$1000 PC's which DELL doesn't make. Nonetheless, if you compare similarly configured models, DELL's are consistently 10-12% cheaper, due to the inherent advantage that DELL has in manufacturing efficiencies, low component inventories, and no distribution channel markup.
The bottom line is that DELL is selling a higher margin product (a strategy which is evident in its sales of notebooks, then servers, now workstations) at a lower cost than its competitors. I think that this advantage will continue to drive DELL's sales and revenue growth for at least the next 2-3 years.
David T. |
