Dell & Low-cost PCs.
stock bull:
Excellent article thanks. I saw the news this morning at Bloomberg. (https://www.siliconinvestor.com/readmsg.aspx?msgid=7890371)
I think the time has come for Dell to take full advantage of the superb low-cost and efficient infrastructure they have built up over the years,so in my opinion if they decide to plunge into this segment they should be able to do it better than the other guys.Remember Dell still has the cost advantage over the other schmoes,in some cases more 'than 50%" according to Michael Dell.That is why I remarked earlier 'Dell to inject little fear of god into CPQ,IBM etc...'
The article you sent me goes a bit deeper into the issue than Bloomberg did. The following excerpts from the article reveals what the strategy could be and how Dell may succeed in this venture if they decide to go into it.
Thanks again.
========================
...Will low-cost PC sales spell the end of Dell's stellar record? Some on Wall Street believe it has put together a way to target lower-profit products without significantly lowering profits. In recent months, the company has begun to beef up its sales of software, networking gear and computer add-ons such as printers alongside its computers. "Given Dell's management track record, it's a pretty good bet they will find new growth," said Phil Rueppel, vice president at BT Alex. Brown. ....
.................
Dell has an advantage, however, with its Internet sales, now running at a $14 million-a-day rate. As part of its effort to use the Internet more, the company is also revamping its service operations to allow customers to search its Web site (www.dell.com) for answers to common problems -- and converse with other Dell customers for potential remedies.
The new approach should allow the company to service more customers without having to rapidly increase its service force. In the past, the company has said it avoided low-cost PCs in part because novice buyers who tend to purchase lower-cost machines added inordinately to service costs.
Vadim Zlotnikov, senior technology analyst at Sanford C. Berstein & Co., says the company's investments in Internet-based self-service can reduce the costs associated with selling to novice buyers. "They felt the spending on information systems, on an Internet site has reduced the cost of serving these customers. If this is true, and they believe it to be, an incremental sale is incremental profit," he says.
Mr. Zlotnikov expects the company to reignite sales to a 42% annual growth rate, while only modestly lowering the 22.4% gross margins it recorded in the last quarter. "If Dell can significantly reaccelerate the revenue growth, the stock will go back to its highs," he adds.
|
