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Technology Stocks : DELL Bear Thread
DELL 133.18-0.1%Nov 28 12:59 PM EST
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To: lin luo who wrote (1038)6/14/1998 12:15:00 AM
From: rudedog  Read Replies (2) of 2578
 
At least they can lower the prices to break even if they have to.

Dell's gross margins are about 20% and net about 6% so they could not lower price very much without losing money. A 400MHz PII which sells for $2600 today could be sold for $2450 tomorrow, and Dell would still make a profit or at least break even. (that's just an example, don't try and find that price on Dell's web page). But selling that box for $1000 would imply that they are losing $1450 on each box. If they did that across the board they would be out of cash in 90 days. Not really an option.

But they could not even lower their margins by more than a few points, let alone down to break even, because that would demolish the earnings growth model on which Dell's lofty stock price is based. I don't know how well the Dell community would react to having employee options and stock holdings under water.

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