Jim:
I don't quite understand your giddiness in recent posts. You continually state, "I told you so". What did you tell us that we didnt know?
That ASP's are falling in the computer industry? Hasn't this (for the most part) always been the case? Isnt this modus operendi (sp?) for Dell? Isnt their model the best to take advantage of this (prosper, even!) in such an environment?
(As you well should know) Dell anticipates falling ASP's and has moved to selling higher end, higher margin products to offset. Their strategy has been (and will continue) to be a raging success.....
Growth rates for higher margin units exceed the lower margin units, and are expected too for quite sometime....Gross margins up for Q1
We bulls have been trying to tell you that we believe MD will be successful in this strategy, and that Dell's overall ASP will hold up much better than its competitors. Based on Q1, this is the case.
The severe price cuts we saw in Q1 will not continue every quarter....maybe Q2...but not every quarter going fwd....and when severe price cutting ends, Dell will continue (again) blowout qrts......and the rest (computer makers) will make some money too...
But, for sake of argument, let's say that severe price cutting continues every quarter going forward (with no end in sight)...in a year or two, how many of the current PC makers are going to want to continue operate in such an environment (especially the clones)...how many investors are going to want to invest in companies that operate billion dollar, no profit businesses (with no hope of future profits)....Some of these companies will exit some or all the PC business, and the most effecient producer(s) will survive....One of which would be Dell....Huge market share gains would occur for the survivors...Declines in ASP would slow....and Dell would make more money than ever....And please dont give me that crap that CPQ, HP, and IBM would all operate their PC businesses as lost leaders....Management would never be able to implement such a strategy....Investors, analysts would kill them for it.......
I find it strange that you post:
<<Dell is facing its most competitive threat ever>>
What? CPQ, HP, and IBM losing money/breaking even on PC sales is a "competitive threat"? One more year of that, and Pfeiffer, Gerstner, and Pratt may not have a job...Since when is a competitive threat when your competitors make no money, and your profits are up 50,60%+ ....
The buying will come back in a few weeks, and Dell will be one of the big beneficiaries..... |
