Techie,
While I don't wish to pile on, it's the breezy, uninformed things you say such as the following that cause others here not to take you seriously:
Tell me in 3 lines what's Dell's value added? If you have URLs I'll be happy to glance at them. Don't tell me it's their service. If Dell can hire Wang & Unisys to do service so can anyone!
Dell designs, builds, markets, distributes and services PCs. The fact that other firms can also do these tasks is beside the point. Dell is not in business to undertake unique roles. It's goal is to make money (gasp!) To do that it must deliver products and services to customers which are valued more highly than the cost of providing them. The name of the game is efficiency, product reliability, cooperation for mutual benefit, both with suppliers as well as commercial end-users, cost cutting, etc. For many of its services Dell cannot and does not hire Wang or Unisys. If you had read the HBR article as others have recommended, you would have known that.
As for ASP, the main reason it is declining is falling prices of components. This isn't a trend that started yesterday, it has been going on since the beginning of computers. Everyone expects it to continue, but so what? Why does this spell lower profits for Dell? If you believe there is a relationship between ASP and profitability, please explain what it is. If you have a model, let's see it.
Let me remind you that ASP has declined dramatically throughout Dell's existence, yet profits have grown steadily. If you think this historical pattern is about to change, then explain why. Carl Bilow may be on the right track in suggesting that chip integration is a threat to Dell. In my opinion he hasn't made a convincing case, but time will tell. At least he understands what is required for Dell to stumble. Another potential threat to Dell is looming competition from firms like Ingram Micro. (See Sig's post). But neither of these arguments, properly framed, assumes declining ASP alone poses a threat. (If the demand for PCs is elastic, it is actually easier to construct the opposite argument that declining ASP will benefit Dell, IMO)
BTW, if it's true that ASP drives profits why are supercomputer manufacturers struggling? |
