Eddie:
A couple of comments/questions to your recent posts:
(1) If I understand you correctly, Dell should be fearful of CPQ's dominance of the fast growing (in marketshare, but not profits!) sub-1000 market. I would ask you to compare the stock price, financial results, and company commentaries from the period mid-summer 1997 until April 1998 of CPQ and Dell. Which company has performed better during this (so-called) sub-1000 boom? Which company is slated to perform better over the next couple of quarters? By then, we will be over 1 year into the sub-1000 boom..At what point does this "attractive" market for PC makers become an "attractive" financial reality for those involved in it? I would submit to you that Dell understands the viability of this market better than you think and is wise to distance itself and focus on higher-margin, high growth pieces of the computer industry (for now- and maybe forever). It is clear that the same consumers who are now buying sub-1000 machines are the same consumers that (probably) would never buy Dell before or now. At this pt., in my opinion, CPQ can have the sub-1000 market (until it becomes more attractive, if ever, at which time Dell will enter that market too, and undercut CPQ in price with its build-in cost advantages)
(2) To mention that CPQ has 27.5 overall margins in the same paragraph with the discussion of sub-1000 seems irrelevant. That margin is clearly being driven by the upper end of the market (servers, workstations, high end PC's). Low end (sub 1000) PC's are clearly a big drag on this number...
(3) Am still waiting for any adaquate (bearish) response to MD's comments last week that he sees (A) massive growth opportunities going forward (B) business STRONG in all segments (C) Dell continues to sell units at a multiple of the industry growth rate (ie., a multiple of 13-18%) (D) Dell has seen little or no impact from the aggressive price cutting of others...
Are you guys (bears) thinking that at some pt., and round after round of price cuts, CPQ and others will find the optimal "aggressive" price cut level and that this will be the magic elixir to turn the tide on Dell's continued march on strong growth and marketshare.....Not only does this seem to be a reactive, defensive business model, but, judged by the last few years of the industy, there is no evidence that this strategy can be successful.
After the flip-flop CPQ pulled this last quarter ("everything's fine", and then 2 weeks later, "flat earnings"), how can you possibly criticize Dell Bulls for their faith in Dell's management? The facts are that Dell has delivered consistently over the past 3 years, and has not given the investment community a reason to be sceptical of their financial or industry claims/predictions. Dell also runs a business model which allows them better access with end-users, ensuring that any (future) decisions that they make are based on consumer-closest information. CPQ can not claim to be as reliable in either regard.
By the way, I am new to the thread and not loyal to Dell for any other reason than that they have a track record of great management, great growth and keeping their promises.... |
