Eddie, sorry if you took things personally, that was not my intention..
I believe that the thread allows for vigorous debate, as long as we remain factual (and, hopefully, logical)...
A follow-up to a few of your comments...
<< Your response: Given the lack of public data as to the margins of the sub-$1000 computers, I am left only to the recite the 27.5% overall margins. Was this offset by servers, workstations? Of course...I clearly implied this in my previous responses. The point is however, COmpaq still is doing great business even while selling these cheap computers.>>
I would disagree with (what I am understanding is) the logic of your last line (and your argument):
If CPQ is doing "great biz" (ie. higher margins, high sales) in one part of the computer industry, but continues to support an area of the computer industry in which margins appear to be lower, maybe much lower (sub-1000 computers), and CPQ can not demonstrate that sub-1000's fulfill any recognizable, sensible strategic and/or financial objective, then CPQ should not remain in sub-1000 computers just to "be there". My point is, based on the evidence so far (over the last year), I am hard-pressed to see where the sub-1000 market can be considered a better growth market (for profits) than the other markets that Dell has identified already, and I am hard-pressed to see the strategic importance of the sub-1000 market especially for Dell, but also for CPQ (could very well be cannibalizing other entry-level CPQ units). At what point is this going to be a "great business" and why?
Or does CPQ think, strategically, that sub-1000 is great because customer loyalty is so strong in consumer/corporate PC sales, and that thru this entry-point CPQ can "hook" more users, and, even though the margin is not as attractive, they will have a customer for life, or have a more-likely upgrade candidate (due to customer loyalty)? Others on this thread have posted much evidence disputing this logic... CPQ has touted their market share (in press releases) concerning their dominant position in the (sub-1000) market; So far, so what? IF it is not the most profitable segment of the market (now or in the future), and does not fulfill an (explainable) reasonable strategic objective, than get out of that "business"! (Actually I hope CPQ stay in, better for Dell)....I am open to any bears (not just Eddie!) to show me why it makes sense for (1) Dell or (2) any other computer companies to allocate capital to the sub-1000 "biz" as opposed to other higher-margin growth opportunities that exist in the industry for these companies..
Let's take a look at Dell. According to MD, Dell manages its company like 10-12 (separate) 1 billion dollar businesses (or vortexs), ie, Europe, Enterprise Systems, etc. Each "vortex" should be viewed, and is viewed, as an entirely separate business, and should "battle" the other "businesses" for capital going forward, etc. (Ironically, ALL of Dell's "businesses" seem to be doing well right now!, so the decision is a bit different than for most companies). Such thinking helps ensure that Dell will not get caught in a "business" that does not fulfill immediate and long-term profit objectives and/or does not have definable, sensible strategic significance. It is clear that Dell does not manage its business with the "marketshare at all costs" mantra, and has been well-rewarded for it (by the investment community)
[By the way....Servers/Workstations make up almost 50% of sales for CPQ, but almost 2/3 of profits. Therefore, other parts of Compaq's business must be providing lower margins (including, of course, sub-1000)]
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>>My response: (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...
<< Your response: I'm waiting too. History has shown that all great "entities" eventually stumble. When will DELL falter? Will it be able to adapt to the market? More importantly, will you see it before others. Given the Bullishness of this thread...you won't see the "writing on the wall" here.>>
Of course, Eddie, all great entities will eventually stumble...That is not what we are talking about here (based on that logic, none of us should ever invest...even in Treasuries!)...We are talking about investing based on what we know, and what we think will happen, and trying to assess individual stock risk (and, maybe for some, market risk) vis-a-vis all possible investment alternatives...Risk/Reward..If you are saying that, because all great entities will stumble, and, as a result, Dell will stumble too in the next 1,2, or 3 years.....That is a pretty weak argument, and this doesn't really add much risk to the argument for Dell. ...If that is not what you are saying, then what is your point? I dont know about you, but I AM looking for the signs of a Dell stumble, BUT BASED ON FACTS ...everyday I am open to the bears' arguments......but, so far, the bears on this thread are not presenting a coherent (enough) case...I have seen cheerleading from both sides, but the longs have easily made a more compelling case........whereas the bears have presented weaker arguments..... I think you are confusing the enthusiam on this thread with the confidence that we have because bears simply have not made their case.....Until they do, I believe that it makes a lot of sense to be long Dell....
<<It has become obvious that anyone who is not a DELL bull
here is viewed with skepticism and branded as a DELL bear>>.
I welcome you (closet bear) and all bears (out in the open), and your arguments. By the way, if you are not a bear, and not a bull....what are you? Either Dell is a good investment (bull) or a bad investment (bear) relative to other investments. I have trouble seeing the case for nuetrality! (unless you are Swiss!)....You dont have to own the stock to be in either camp, either...... I see you on the CPQ thread all the time, and you are pretty warm and fuzzy about CPQ (and sound pretty CPQ bullish to me!).....does that mean you are not a "bull" or "bear" for CPQ either...C'mon, let us know !
Hang with us! We need guys like you! I enjoy the spirited battle..
Until soon.... |
