Hi LONGonDELL; I agree wholeheartedly with: DELL has
never targeted the family that makes less than $30,000 per
year, and really isn't interested in selling PCs to them.
This is a major problem that DELL has failed to address.
It is quite similar to the major problem that the US auto
makers faced when they became uninterested in selling
small, cheap, automobiles.
The problem for DELL happens when the affluent families (and
businesses) start buying the cheaper computers.
But why would the wealthy do this? They want only the best
for themselves, right? Not the case. History has plenty of
examples where the middle to upper middle class bought the
expensive early models, but started buying much cheaper stuff
when it became available. I am thinking of CD players, TVs,
etc. The surviving players in these markets have to move to
the low end, as their target customers desert the high end.
I remember when a pocket calculator cost $500. Only wealthy
people could afford them, cause $500 was a lot of money back
in the 70s. Eventually industry built a pocket calculator that
middle class people could afford, and guess what? The rich
bought the cheap calculators too. Sure the companies that
made them are still in business, but extrapolating total $ sales
based on $500 calculator prices turned out to be a mistake.
The mature market turned out to be a lot $ smaller than people
back in 1979 expected. (And with a lot smaller margins. Also
note that the calculator makers, that did not produce their own
chips, went quickly out of business. Same thing with the
graphics card makers that used other peoples' silicon. The
PC business will by and large repeat this natural evolution.)
When you can put a system on a chip, it makes that system
at the same time faster and cheaper than previously.
Systems on a single chip are better. They are both more
powerful and cheaper at the same time. They give quite
high performance for a much lower cost. This immediately
flattens the Price/Performance curves, eliminating entire
market niches. Product niches with different performance,
that previously had different prices, then have the same
low cost. Prices immediately drop to the new low cost for
a wide range of performance levels. This includes machines
that the wealthy would have willingly paid a lot more for
previously. Persons desiring more power buy the
new, cheap, machines, cause those are the machines
with more power. They are also smaller, lighter, use less
energy, have a longer MTBF, are easier to recycle,
are standard, and are cheaper to replace.
Look around at graphics adapters. Count the number of parts
on them. Compare to what the business was like 10 years
ago. Compare the prices on the boxes. Are wealthy people
still paying $1000 for a decent graphics card? Nope.
What happened to the high end graphics card makers?
They are gone. Who has the graphics card business
now? Companies specializing in very large production
runs.
What has happened in graphics cards (i.e. integration of a
subsystem onto a single chip.) is now going to happen to
the mother boards. DELL is not the company to bet on to
thrive during this change. Especially not at its current
valuation. They have the wrong factory line. They have
the wrong market target segment. They have the wrong
distribution. They are not vertically integrated with the
ability to produce systems on a chip. They are not the
company to bet on for this technological change.
Who was that guy who kept posting to me that a sub $600
computer was utterly impossible? I've got a lot of engineering
design and cost reduction experience, and I know what is
possible. I know what the engineers are working on, and I
have posted links to allow the rest of you to look for yourselves.
The evidence continues to accumulate. It is a slow change,
but it is quite inexorable.
DELL will continue to be highly profitable for quite some time,
as these things are slow to change. But remember. When
DELL posts its books, those are backward looking numbers,
not forward looking ones.
-- Carl |
