BigBull, an associate and I were just talking about CompUSA today. Last fall we were following the company, both from an investment angle and we both took advantage of some freebie rebates for 16 MB DRAMs. The 4th qtr is typically very good for CPU and other retailers and was particularly good because of all the special promotions and give-aways. We got the sense from listening to their conference calls that they were pumping more up that just store sales. The DRAM rebate offered the 16 megers for $59.95 with a $59.95 rebate. I guess the plan was that they would give one away at that high price and people would then buy another one at the regular price and other junk while they were in the store. We each got one and plugged then into my friends machine. The rebate was supposed to turn around in the typical 4-6 weeks. After three months in which neither of us received the rebate and after noticing that insiders had started selling the stock at then inflated prices, we got to speculating about how the management might have gamed the investors: "Hey, we know that our business is cyclical, let's push as much sales as we can into the 4th qtr. by recognizing all these rebates and sliding the numbers at the beginning and end of the period. Then let's bail out of a lot of our stock positions. Then in the 1st qtr. well pay out the rebates, adjust our inventories by heavy discounting, and push out sales, forcing the stock to pull back and preparing for the next cycle." Pure speculation but the company actions and results sure look like the gamesters in CPU management have some burgeoning bank accounts to chuckle about at the expense of hyped investors.
I talked to a sales manager for a national computer distributor today who confirmed some things that have been reported recently in CRN and other industry rags; corporate customers are seeing much lower PC prices as a result of the sub $1000 phenomena but the overal budgets are still strong. His firm's sales were way ahead of last year despite the lower PC prices. Customers were loading up on more networking gear, software, peripherals and larger numbers of PCs rather than cutting the budgets. This declining price trend will continue throughout the next year or three at least, but IMO, not quite as accelerated as we have seen it recently. Some items, such as 200 MHz Pentium class uPs are down to around $100 now (OEM) and the sweet spot is moving up to 233 MHz ($150) and above. My guess for uP pricing for the end of the year is that 233 MHz parts will sell for around $75 by the 1st qtr. of next year. The C6+, K6+ and other advanced parts should fetch not more than $150 - about where K6 & M2 pricing are today.
Over the long term, PCs will diversify much more than they already have. In just a short period of time we have seen a tremendous amount of fragmentation of the PC architecture and marketplace. That trend will accelerate as Intel brings out their "Wilted Celery chips " (copyright of the SI IDTI thread!) and the PC architecture continues to mature in the midst of increased competition and shift in driving forces toward the internet and consumer applications. MS and others realize that the PC must become better suited to the average consumer and they must agressively clean up their act in bringing rationality to compute environment architectures. Even though there are a lot of vested interests to maintain the status quo in many technical areas, Lots of things conspire to make this trend inevitable.
IDTI should be able to carve out several exciting areas to bring value to this evolving environment. It should be a very stimulating and exciting place to work where creative people will find lots to challenge and reward for themselves. |
