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Technology Stocks : Dell Technologies Inc.

DELL 124.44

-7.0%

11:27 AM EST

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To: MichaelW who wrote (36057)	3/30/1998 10:45:00 AM
From: rudedog	Read Replies (4) of 176387

Not necessarily - as Venkie says, it depends on what the underlying costs are. If Dell had some room in the memory and other components, they may just be working to their margin targets to maintain share in the critical workstation market. But if they are cutting into margin targets to maintain share then I would see this as creating a potential earnings risk. I have tracked CPU and memory price shifts over the last few months and it looks to me like Dell should have realized about $550 in component savings for the configuration quoted, but the price cut is $723. Where did they get the other $173? These numbers are of course approximate since I do not know Dell's exact volume discount structure but I'm sure Dell is in the top discount tier. A shift in margin target of $150 on this box represents about a 6% shift in GM which is pretty aggressive... I'm just a little concerned because this is different than what I would have expected given Dell's statements over the last few weeks, I would have been a lot happier with a cut in the 8% range which would indicate to me that they were maintaining margin targets while stinging the competition by passing component costs to the market more quickly. Maybe someone knows if there are other significant cost reductions that could be part of this like the disk or graphics card pricing?

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