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Technology Stocks : Dell Technologies Inc.

DELL 122.12

-0.3%

11:03 AM EST

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To: jim kelley who wrote (36145)	3/31/1998 7:48:00 AM
From: rudedog	Read Replies (2) of 176387

This dog may be about to bury that bone... looking at all of the component price cuts it does indeed look like Dell may have actually been able to maintain or improve margins even with this price cut. BTW the monitors were 19" not the 21" but still there should be at least $100 in cost reduction there. An off-thread Dell buddy (a fairly senior guy in their marketing organization) reminded me that the Workstation margins are not Dell's average, but much higher, more like 40%. So cost savings of say $650 translates to overall price cuts of over $1000, much more than Dell actually took. He also said that they like to leave some room in Workstation pricing because these are often sold into very competitive situations and this gives the people working an individual deal flexibility to match price while still preserving target margins. He believes Dell has 8 or 9 points advantage at any point in time due to the combination of distribution efficiency and the effects of shorter inventory time. They don't pay a middleman, they can pass component cost reductions on more quickly, and they don't have costs associated with either inventory carry or 'price protection' to the channel (which he called contra-revenue). Naturally, being a Dell employee he is pretty bullish! He believes that as Dell's product mix shifts more to workstations and servers that their average margins will go up. He claims that Sun has average margins on server and workstation products in the high 30's, with a less efficient model than Dell's. I sure want to be holding this stock if they can do that, we could see the earnings growth even with no increase in unit volume or market share. It sure looks like they have a lot of flexibility to respond to pricing action in the market.

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