Gabriel, some fuzzy-headed thinking from "analysts":
This is from the street.com article you excerpted:
For the direct-sales box makers Dell and Gateway (GTW:NYSE), the outlook is a bit brighter, but these firms aren't immune to the decline in average selling prices either. Dell CFO Meredith, for one, has sought to downplay this free-fall in PC prices: "I'm not a believer in the theory that ASPs are in a death spiral," he has said many times to analysts. [ Of course not. He studied and understood economics -CTC] The numbers, however, do not lie. [Perhaps not, but drawing false and unfounded conclusions from those numbers makes ones nose grow. Ask Pinnocchio -- CTC]
The average selling price for the personal computers dropped to $1,221 in May 1998 from $1,537 in May 1997, according to the tech research firm PC Data. Interestingly, box prices over the last month dropped $30, representing a slightly more modest decline than in previous months. At this pace, ASPs should fall below the magic $1,000 level by next March. If anything, both H-P and Compaq have been aggravating the trend. They have sought to grow sales to maintain market share, even at the expense of profitability, says Roger Lanctot, a computer analyst with PC Data.
And here it is gang -- the logically unsupported leap of faith:
[snip]
Back in May, International Data Corp. analyst Roger Kay warned that Dell's April quarter would be its last positive one for a while. "ASP declines will finally impact the company's earnings," he warned. Don't be surprised, however, if Dell figures out a way to stay above the curve for a bit longer.
Analyst Chuzzlewit The Cat of Feline Analytics warns that reading analysts who don't understand economics could be hazardous to your wealth. He suggests selling Kay short is a good investment because his credibility will fall in August, when he will explain how Dell increased both its gross margin and substantially increasing its gross profits once again in the face of falling ASPs. My Kay will then explain that he foresaw all of this and has been grossly misunderstood.
TTFN,
CTC |
