re: <<Is it that you feel these companies have just now realized that they need to STOP DELL and will now get serious about it? They have all ganged up on Dell and have failed miserably every time. Now they
have the answer? Evidence suggests not. >>
Meathead,
You seem to be under the assumption that IBM, HWP, CPQ and all given their best shot.
I am saying that IBM, CPQ, and HWP have a lot more cash to burn up in a battle. When you are the King of the hill, you try to stay there without hurting yourself. But when your kill starts to get eaten by a competitor, you will dig ever deaper into your reserves (read cash on the ballance sheet) to maintain your position.
If, and this is just an IF, What if CPQ's pricing moves are hurting DELL. Not badly, but enough to make DELL cheet to make the quarter. Then CPQ keeps it up and DELL can not make the next Q.
The stock gets killed, but the real question is what happens to DELL's cash position.
Say CPQ and IBM burn 1/3 of their cash, that is a combined 4 billion in a couple of quarters, to drive prices into the ground. That means that each company looses 1 billion per quarter for 2 quarters each.
That would be a mighty big price cut. Could DELL maintain their rate of growth in that environment ?
How long would DELL last if the company went cash flow negative ?
In the described enviroment, all Box builders would go cash flow negative. the ones with the most cash would still be arround at the end.
Well they spend all their free cash on share repurchace. If DELL needed cash, by that point, no one would want the stock back.
I know Dell is a good company, The question is, to what lenth will CPQ and IBM goto to keep them in their place. How hard will DELL's much larger competitors fight to maintain their position.
BTW, I think looses money on PC hardware now anyway, so this would not necessiarly be that much more of a drain for them.
Jim |
