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Technology Stocks : Dell Technologies Inc.

DELL 124.49

+4.3%

9:57 AM EST

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To: Geoff Nunn who wrote (63804)	9/5/1998 11:19:00 AM
From: The Phoenix	Read Replies (1) of 176387

Geoff... Exactly! If you have a business which sells goods to the miners and you're making a killing $$$$, than that will attract new entrants. Of course to build a decent competitor there will be hurdles - marketing, capital, supplier contacts, etc..; these are the barriers to entry. The lower those barriers to entry and the higher the returns enjoyed by existing businesses the more new competitors you'll see enter the market. You see the analogy now? People with lots of capital went after these businesses because they were REALLY profitable. If they weren't they'd simply pick up a pan and go panning. Folks with little money...well, they panned. Now imagine if the high margin business wa panning! Everyone would be buying those pans!..no one would give a rats behind about selling the things. Of course the pendulum swings the other way eventually. See the dynamics? Back to technology: In the case of the equipment makers software and hardware have huge barriers to entry since they take many many man years to perfect after which time existing players are already delivering next generation products. So, margins have to be REALLY high to justify getting into this business. In the case of DELL, they indeed have a unique distribution practice but it continues to be my belief that the barriers here are much lower, AND given the post about profitability I posted a bit ago - apparently DELL profits are higher than Cisco's. Add to that very strong incumbents that want their market back....which is what makes me continue to to believe that although DELL will do OK in the near term that things will get more difficult as time passes. In my estimation the first half of 99 will be a tough time for 'ol DELL. OG

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