Jim, I will try once more, and then I promise I WILL GIVE UP!!! Talk about faint praise: "I don't think the JIT model is a real liabality."
Yegads Man, JIT shines in situations where inventories are depreciating because it completely avoids the depreciation. BTO does not equate to JIT. So, what we have is a situation where some of DELL's competitors are clogged with inventory because they don't have JIT manufacturing.
Now Michael Dell tells us that industry wide unit growth looks good (15% I think he said), and in fact suggests that on the basis of growth (and here I believe he's talking about growth in earnings) the stock may be undervalued. Now, considering that Dell's P/E is about 50 or so doesn't this suggest to you that M. Dell thinks that earnings growth will exceed that number?
What about the competition?H ere is the problem I see for companies like Compaq:
1. They are clogged with inventory that is either obsolete or rapidly becoming obsolete.
2. That inventory is carried on the books at considerably higher cost than the newer, more capable components.
3. According to Pfeiffer, this is a multiquarter problem, but Compaq still adheres to distribution through its traditional channels.
Therefore:
1. In the short run they need to figure out a way to rid themselves of the older inventory without cannibalizing their newer offerings.
2. They need to figure out a new distribution model -- their current distribution channel was an obvious cause of problems.
3. They need to re-evaluate their entry into the sub zero market. Just as IBM discovered problems with the profitability of its PS2 and withdrew, I believe that Compaq will need to get out of this market.
In short, I believe that Compaq is suffering from a lot of self-inflicted pain, and that Dell and GTW will be the primary beneficiaries. It is entirely possible that Compaq will lose market share.
So given all of this, why would anybody choose Dell as a short candidate in this industry? Perhaps there is a certain Dell-envy going on, after all look at the stupendous gains that many of the people on this thread have enjoyed! And comes Michael Dell to tell us that the party isn't over.
I find that I'm rambling. Probably drug induced as the result of sitting in a dentist's chair followed by pain pills.
Anyhow, good luck to all
Paul |
