Frank, re:<<The big boys are now pushing Compaq over Dell. Why do you think they are doing this??>> Two main reasons. First, the PE for Cpq is around 30, however, I would need to check this figure. Second, its rumored that Cpq will spin-off Alta-Vista, a 1 billion dollar deal. Taking Alta-Vista public will be another internet stock IPO, and we all know what this means.
With respect to Cpq going direct. We need to recognize that they really will have a hybrid model. To my knowledge, they are going to keep the retail store (channel) as well as selling direct. This puts Cpq in direct competition with the CompUsa, Best Buys, etc. IMO, this direct competition is going to adversely affect sales. I just don't see how they can have it "both way" and still become as efficient as Dell. One thing that I've learn over the years is that its very difficult to take the lead from an established company by being a copy-cat. By the very fact that Dell was there first gives them a major advantage over the competition. In no way is this to infer that Dell can relax and take it easy. They must continue to innovate and stay ahead of the competition.
The only problem with Dell is the expectations that the MM have placed on the company. In some ways, Dell is now their own "worst enemy". This is a high class problem for Dell, but still a problem.
Only time will tell how this transition to the direct model plays out in the sector.
Stock Bull |
