Hi rudedog; Your observations on CPQ and DELL regarding
R&D and technology jive with my own personal observations
from five years ago, and what my buddies currently in IS
tell me. That is, CPQ is a high-tech company, while DELL
is a box maker. Incidentally, those same IS guys tell me
that they expect CPQ to always have 4 or 5x the sales
of DELL in servers, though I don't know whether they
meant by sales or units...
The trends I see developing are to a low end PC a lot
more powerful than what is currently in use, and with a price
and parts count similar to a handheld calculator.
10 years I was a design engineer at Renaissance GRX,
(obsolete symbol RENX, which sold a design to CPQ,
which is why I spent time there), and one of our high
end graphics card had about 500 parts. Integration
has reduced the parts count to no more than 50 to 100.
The price has simultaneously dropped from $1000 retail
to under $100.
The number of graphics cards sold increased, but not
by a factor of 10. Consequently, most of the companies
involved, (including RENX) went bankrupt.
It is still possible to design a good high end graphics
card at a cost of $1000. But it would include features
not needed by the vast majority of applications. The
same thing is beginning to happen with standard
PCs. The first clue is when industry ASPs start dropping.
This is the beginning of the crunch. I personally have
worked through these crunches in both the mini-super
computer market and the high end graphics board
market. I recognize the signs in the box industry now.
I expect that DELL will continue to have the best BTO
computer line in the industry. That the company will
survive I have no doubt. That they will suffer when the
price of what they sell drops by about 10x, I also have no
doubt. In other words, I expect the price of the average
PC compatible computer purchased by the public to be
in the $100 to $150 range within 3 years. A complete
system with 1kx768 monitor and laser printer should be
around $300.
Now the good news is that at these kinds of prices, the
third world will be able to afford machines. On the other
hand, they will have so few parts, that the third world will
insist on making them themselves. There will be very low
profits in the business. I wouldn't be surprised if the chip
makers start putting together the boxes themselves,
completely eliminating the box makers from the business.
We saw this last item happen in calculators. There once
was a thriving industry in calculators, with high (unit) profit
margins, and large numbers of companies. Now TXN feels
lucky to get 10% growth out of the business, and margins
are pretty low. Note that TXN makes its own chips, as
does HWP...
Maybe DELL will make some fabrication acquisitions.
They certainly have enough market cap.
-- Carl
P.S. Renaissance GRX, after name change and bankruptcy,
is still in the graphics business as Appian Technology, privately
held, I believe. |
