William and all;
The fact that GATE sees margins flat in 1997 is the single most bullish comment I have heard with respect to the box makers in a long time. With increasing competition and the inevitable decrease in the rate of DRAM price declines, I think most people who follow the industry would have expected margins to soften at least a little in 1997. If GATE can really maintain margins in 1997 this will be incredible. Margins have improved this year due to many factors. The number one factor has to be lower cost components (especially dram). Obviously these price decreases can't go on forever. GATE (as well as DELL and MUEI) are all positioned best in the industry to deal with lower margins. These companies built empires on much lower margins in the past while all but destroying the big boys (IBM, HP, Packard Bell, etc.). Whatever margins eventually go to (and they will decrease in the out years) the direct channel will be best positioned to compete. It is these guys who have pushed the pricing envelope and led to the continous price cuts we consumers enjoy. Before these guys came around, IBM, HP, etc were raping customers and charging premium prices.
Long live the direct channel where inventories are low, turns are high, quality and reliability are superior, and support is excellent.
FF |
