Loren,
Ok, you want to talk Dell here? Good. A few questions.
How do you think Dell will fare when it enters the UNIX market in 2000? Sun, IBM, HWP and Compaq are planning to use their servers as loss leaders for their service and financing businesses. The only partners available for Dell are companies that have already gotten their heads bashed in by Sun, IBM, HWP and Compaq in the UNIX marketplace.
Secondly, How do you think Dell, a pure NT box maker up to this point, will fare when it starts to compete with IBM and EMC for accounts requiring storage systems that have to work with mainframes, UNIX servers and NT servers. Dell has no mainframe expertise and no UNIX expertise. Partnering? There is no company or combination of companies currently still in business that Dell can partner with that can match the installed base and knowledge base of EMC and IBM. If 64 bit Windows and Merced get delayed some more, there is another company in Texas that would love nothing better than to finally clobber Dell in the corporate market with its Alpha chip which can run both UNIX and NT.
Note that consumer PC prices are still headed down (I know Dell has been insulated somewhat from this) and business PC prices are also headed down although at a somewhat slower pace. In notebooks, you want to watch Apple's follow up to IMAC (2nd quarter 1999) this time in the form of a sub-$1000 laptop that some people are saying is out of this world. That is going to accelerate the decline in ASPs in notebooks that has been going on already.
Some people believe that Dell's sales will start to decelerate in the 3rd quarter of 1999. I subscribe to the point of view that holds that sales deceleration will probably start during the first quarter of 2000 with margin compression to follow as Dell ratchets up R&D and wades into the tight IT employment market to beef up its systems integration and support businesses so it can avoid being blown out by scorched-earth tactics by Compaq, IBM, etc. Slowing sales (still healthy though) plus higher R&D and SGA are typically red flags that trigger the stampede of institutional holdings.
Dell truly deserves to be the best-performing stock of the 90s and I think it is probably going to have its best year ever in 1999, but things don't look as rosy beyond that for the reasons I have mentioned. I'm looking forward to your reply.
Regards,
Gus |
