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Technology Stocks : DELL Bear Thread

DELL 125.97

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3:59 PM EST

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To: Geoff Nunn who wrote (1873)	9/7/1998 5:18:00 PM
From: rudedog	Read Replies (2) of 2578

Geoff - Intel's task of smoothing its own inventory would be made easier, not more difficult The problem with this is the huge difference in manufacturing cycles. Intel's has a very long time constant, so the ability to know a day or a week in advance what demand will be, is of absolutely no value. They need to know months in advance. I agree that Dell is only a portion of their manufacturing load. CPQ is a much larger fraction. At one point CPQ took nearly 30% of Intel's output. Although that is no longer the case they are still Intel's largest customer. Intel is willing to provide aggressive pricing to keep at least that section of their output stable. This is a complex issue, and I think your point about the linkage between supplier and customer in a JIT world is a very interesting one. I devoted several years of my life to this issue in the late 70's when General Motors was shifting to JIT. At the end of the day the suppliers took it in the shorts. The issues were similar - GM had a short time constant, the suppliers in most cases (the steel makers in particular) a much longer one. Many of the supliers passed their costs through, and it ended up costing GM for a while until the other big players also went to JIT and leveled the playing field. I don't see that happening here, since almost by definition Dell has a unique requirement because of its manufacturing model. That's the very reason their model is so competitive on the other side (their customers). I believe not only that this is one of the few areas where Dell is at a potential disadvantage, but that Dell senior management is well aware of this. There's just no easy answer since Intel (in particular) is so hard to push around.

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