re: Industry over capacity? Not sure, seems like China and India could use a few more, what do you think?
Ken,
I am going to go out on a limb here and describe what I think constitutes over capacity.
In an industry, over capacity exists when Inventories grow despite increases in unit sell rates. When this Excess inventory causes Price declines, In the case of PC's accelerated price declines, It is over capacity. When companies start to utilize promotional give-aways, That is a sign of over capacity.
When companies find their business unprofitable despite Unit growth, That is a sign of overcapacity.
I see a lot of this in the PC industry. I think of it as too much horsepower available.
RE : <<<<<<I don't see DELLs inventory problems, so much as their suppliers problems with inventory. After all, DELL doesn't check it in until it is sold. How is that a problem? >>>>>
I have been through this before. DELL's relationships with their suppliers is not known to me.
I think a unit growth decline without DELL accumulating invintory of parts would cause severe strain on supplier relations. the financial impact of that strain is currently unknown.
Since DELL fears nothing, I am going to assume that DELL thinks they can strain these relationships without penalty. Considering that DELL represents less than 10% of the market for a supplier, I question how much strain they will be willing to take.
Jim |
