Michael,
Percentage margins may actually increase (in the absence of market share wars) if ASP falls due to drop in component prices. In that situation, if I sell a box for $10 where $5 is the cost of the CPU and my profit is $2, if the CPU price drops to $3 I can maintain my profit, sell 10% (say) more boxes because of lower price (assuming demand doesn't grow at the same rate as cost reduction), and have a better profit margin, better earnings and lower revenue.
This is not necessarily a bad situation for the boxmaker as long as component prices continue to fall (Moore's law and all). However, the lower revenue invariably raises red flags for Wall Street. As I understand it, the rationale goes that pretty soon margins become too high to attract other boxmakers who drop box prices by more than the reduction in the cost of the CPU in a price war situation, hurting margins and revenue and hence earnings - resulting in a vicious cycle.
And there is indeed a price war going on. However, if a particular company gains more market share, it will emerge victorious in this case.
As for AMD, they are chasing a moving target. They do have good technology but their execution leaves a lot of things to be desired. I was rather happy that they came up with the K-6, as I dislike monopolies. Well, it had the desired effect and the consumer benefited. Unfortunately AMD didn't.
Broadband may lead to a major upgrade cycle, IMO. As for DELL's PE, it has a forward PEG < 1. How many companies do you have with earnings growth > 50% and forward PEG < 1. Finally, I see no signs of cyclicity in DELL's performance, as distinct from the PC market at large.
-BGR.
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