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Technology Stocks : Dell Technologies Inc.
DELL 122.70+0.2%Nov 18 3:59 PM EST
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To: K. M. Strickler who wrote (34896)3/19/1998 12:30:00 PM
From: Chuzzlewit  Read Replies (1) of 176387
 
K.M., I agree with your points. That was one very sloppy analysis. I was in the insurance/reinsurance business, and they do use OPM, because premiums are pre-payments. I suppose that the closest thing here is that if you look at payables expressed in days of COGS you will find that it is greater than A/R expressed as days of sales.

The major point that distinguishes Dell is that it is an extremely efficient manufacturer which allows the company to generate large profits based on rapid turnover and low margins --more like a supermarket than a typical hi-tech manufacturer. That's what gives rise to capital efficiency, and that's what gives Dell the best return on assets of any business I've ever seen!

There is another telling point (my apologies in advance to jbn3 on this one!). In the Harvard Business Review Article Michael Dell pointed out that he consciously avoided the trap of designing components, or, as he put it, if there is a twenty-horse race why should you be the twenty first horse. Isn't it easier to go with the winner? In choosing that route he avoids two pitfalls: (1) spending a lot of money needlessly; and (2) designing a component that is inferior to one already in the market place.

Regards,

Paul
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