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Technology Stocks : Dell Technologies Inc.

DELL 123.51

+0.9%

3:42 PM EST

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To: Chuzzlewit who wrote (66573)	9/22/1998 12:56:00 PM
From: The Phoenix	Read Replies (2) of 176387

Chuzz, I think if you go back a couple of posts you'll see that I softened that position and acknowledged that my language has been a bit strong. Not just any competitor can emulate DELL's business model and do agree with you in that new competitors without an existing channel have a somewhat easier time since they have much less to risk. Still, perhaps my business saavy is not as good as everyones here but I fail to see the overriding pain involved with moving from an indirect to a direct sales model. DON'T MISUNDERSTAND ME... I know it's difficult and that as these existing competitors move to a direct model that the distribution channels will give them less room on the shelves and stop stocking and selling their product. To be sure this is a bad thing. I do believe that this effect can be minized either by using geography, or product mix, perhaps coupled with incentives. Remember, if you're HWP or CPQ and the direct model is more lucrative (both from reveune and earnings generation) you might just have to make that move. BUT, I don't think this move has to happen in a drastic way...there are a number of ways to do this slowly. Suggestion #1: Indirect Models are different the Direct Models. Perhaps they sell the lower end consumer models through their channel and take the high performance business oriented models direct. Once the direct model is signficantly established they could migrate the remainder of the product line. However, they really don't have to since DELL targets businesses with higher end models. In effect these competitors would be competing with DELL in the business market using the DELL model while competing in the consumer market using the distrubtion model. They could go as far as to "subsidiarize" this direct business. This may not translate into the earnings that DELL enjoys but it would probably have an impact on DELL growth... Suggestion #2: Establish the direct model geographically - especially internationally where perhaps they have less of the distribution channel presence. This does two things..it minimizes DELL's growth in these countries - or at least provides and equivalent competitor with an equivalent model and helps the competitor (HWP or CPQ) establish their direct model and perfect it. Once perfected they could migrate this delievery model to established markets. Suggestion 3#: Begin developing the Direct Model and at the same time reduce the number of indirect channels - in effect giving a particular store - say Cicuit City - exclusive rights to a geographic area. Simultaneously implement a program (rebate + sales incentive) at that exclusive store such that commisions for selling their model are higher than selling competitive models. Again the in-store models COULD be different the direct models as in suggestion #1. Oh...I'm sure there are 10 other even better suggestions... but this is what I came up with ... kind of a stream of conciousness thing. O OG

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