victor,
Short term - tomorrow is not he time for traders to jump on Compaq. They want to find a bottom and see it bounce first. In fact we may be losing some more traders tomorrow as they conserve capital.
Next week might bring some market news to lift the tech sector, but I doubt it. The fundies are looking for bargains now. They will wait and buy slowly for as long as they can. This is normally the pits time of the year for techs anyway.
Bottom line, I don't see Compaq below $40. If goes below $40, I don't see it there for long. $37.50 is forward 20 PE on conservative projections, and Compaq is no 20 PE stock without interest rates being higher. Any buy under $40 is now a bargain much as any buy under $30 was a bargain last year.
Enough of price. IMHO Dell is not a low cost PC maker. CPQ sets up a line runs a ton on one design down it and ships to retailers. The production run is done and they are on to the next model. Large lots of parts bought at a discount going together fast and shipped to a large number of retailers. If the model hasn't cleared the shelves before the next model in that class, discount it and make room for the new replacement model. Classic mass production. This is not in Dells business model, or culture.
Starting a price war against Compaq would be playing right into Compaq's hands. They want Dell to start a price war. I have one question about Dell starting a real price war. How? Compaq's mass production and direct and retail distribution combined with deep pockets, and income from other products and services would eat Dell alive. Compaq can realistically sell PCs at a small loss or breakeven for an extended period of time. Dell cannot. If Dell does try it, the stock will be worthless inside of a year. Market share with no earnings or a loss in the more mature PC business is not the same as losses while gaining market share in a new business. PCs are not the Internet.
Now I will get off my soap box.
NW |
