Kevin Linder;
I agree but the worst that could happen to Dell is that it might lose a little market share. It is still a very well managed, profitable company. Shifting market shares among the leaders is a good sign of a healthy market in any manufacturing sector. It means that competition is very keen because every percentage point is big money. That in turn, is a strong indicator of overall demand and the manufacturers' response to it.
So, whatever the story and we never see the whole story, Dell's numbers, while important, won't change the market. As you said, someone wins, someone else loses but overall demand doesn't change. It still remains high. Many companies are replacing machines because they timed their leases to the Y2K changeover. Most PCs are leased at the corporate level. Since there is almost no after market most companies have caught on and don't try to amortize their machines. They just replace them every 2-3 years, whether or not, they need to.
Since more and more storage capacity will be needed to handle larger files and programs the disk drive makers are back in the manufacturing cycle loop. I think, disk drive technology got ahead of software needs for a while and it hurt the manufacturers because new and improved products for most PC usage was not needed. So, price became the differentiating factor. Everyone got hurt. As software catches up the demand for faster drives with larger storage capacity will show itself. Here SEG has an edge. They just announced their technology can now produce drives with 3 times the storage capacity of the best current drives. 100 gig. drives will show up in two years and they'll be affordable. Another thing that interests me is that manufacturers of other types of products like printers and VCRs are now beginning to put HDs into their devices. I believe this application change will broaden. DD makers are not going to be limited to just computer OEMs in the future. Demand for DDs in other sectors might even exceed computer OEMs eventually. Imagine cars with DDs installed. They are already installed in all types of aircraft which fly and land by themselves. That is why I think the future is very bright. If SEG can improve its timing to market for product and stay ahead of the pack in technology its revenue, margins and profitability will grow very fast. The Cheetah and before that the Barracuda have proven out that business/ technology model.
Back to DELL. Whatever demand produces in the way of giving technology a direction there is always a way to manufacture more efficiently or do it better and accept tighter margins in return for volume. While component prices have come way down for DELL so have they for everyone else. IBM still makes the most expensive PCs aside from a few niche manufacturers. Doing it cheaper has always seemed to be DELL's forte. I don't expect it to change even though, the pendulum is swinging back the other way right now. It is the character of the founder, his managers and their marketing concept. Unless their current business model proves unsuccessful I don't expect that to change much. If necessary, they have the financial muscle and the smarts to change it. Look at Apple. A lot of fundamental rap for a TA, whew I'm tired.
PHOTOMAN
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