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Technology Stocks : Compaq
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To: SecularBull who wrote (30634)8/7/1998 5:11:00 PM
From: Rob Rob  Read Replies (4) of 97611
 
LOD,

Well it appears you have been in Dell just long enough to be ignorant of the past. Your comments about '98 profits being higher than CPQ will most likely play out. But unless you are quick with your decision making, you will get hurt by Dell's falling stock price because it is in the extremely over valued category. This market is very unforgiving and the future spells trouble for that "boxmaker". All they do is make boxes. That's it. There is no value added at all. Several people on this thread have been trying to convey this to you but it appears you are to busy gloating.

I remember when no one wanted this stock. No one. That was just four years ago. What has changed since then. The internet. Businesses are carrying this company right now, but I believe in the future if you don't have a service arm your margins will be squeezed to nothing.

There is nothing stopping the "informed" computer purchaser from going to the local mom and pop shop to build a computer for less money than what a Dell Box would cost. This is a momentum stock pure and simple.
When the momentum slows say so long to the "higher valuation than the rest".

I believe we will see computers go the way of the disk drives. Razor thin margins. Hwp, IBM,and CPQ have the model of the future. These companies are setup to supply any corporation with not only hardware but services and solutions as well. Services have higher margins. Check it out. Why do you think the market continues to reward IBM (a slow grower) with a higher stock price. Services and solutions. Corporations are always looking for ways to cut fixed costs. If they could outsource some or all of their IT needs and still get the same level of response time and reliability or improve it they would do it in a heartbeat. The manufacturing departments of the fortune 500 have already gone through this outsourcing paradigm and the IT departments will too. Lower overhead costs mean more money to the bottom line (PROFITS). This allows the companies then to focus on their business.

Will Dell survive, probably. They are raising lots of cash right now. What will be interesting is what they actually do with this capital. It will be fun to watch who actuall turns out to be right. Dell will not always remain the darling of Wall ST. One day it will be "just another boxmaker" unless they do something different. You have made good money with this stock but be careful in thinking Dell will continue this incredible run.

Rob Rob
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