You missed my point. I said eventually PCs are just made with indistinguishable features. And when that materializes, it will be silly to BTO. That will be the time when BTO will work against Dell instead.
As far as I know, BTO has as much advantage and as much problem. First of all, as many here know already, the advantage of BTO is to minimize inventory. With less capital tied up, Dell can pay lower bank interest (actually earn interest...) And as components price plunged in 1997, Dell has additional advantage in not holding obsolete products.
The downside of BTO model is Dell cannot gain from discounts offered only for large component orders. Say Dell orders 25k hard drives a day and orders 35k the other day and orders 30k the next day... On the other hand, Compaq orders 1,000,000 hard drives every month in one shot. I can imagine Compaq actually pays less per HD at the spot. In addition, Dell has to pay more for the fastest shipping since they can't afford to wait for parts. (I know that Dell actually requires part suppliers to be located within like 15 miles of the manufacturing site. Still, shipping cost paid by parts suppliers will be passed onto Dell somewhat.)
Most recent independent survey, just completed, including Feb. sales data, projects DELL to have 50% profit increase on 49% sales increase...
However, ANALysts see those number slowing in the future. For example, BARS sees revenue growth of 38% and 33% for the next two years while earning will grow 41% and 27% for the same period according to First Call. Definitely, Dell is slowing down... |
