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Technology Stocks : Dell Technologies Inc.
DELL 133.20+5.7%Nov 26 3:59 PM EST
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To: Dan Hua who wrote (116169)4/11/1999 10:25:00 AM
From: Chuzzlewit  Read Replies (1) of 176387
 
Dan, the "weakness" is an illusion. Dell stated that it expects a 14% increase in industry unit demand, and if history holds true, that implies a 50% increase in unit shipments from Dell y/y. What we are seeing is continuing drops in component prices and declining gross profits for Dell's competitors (but not Dell). The result is heightened competition and there will be casualties, but Dell will not be one of them. The reason is quite easily seen: Dell's model is so much more efficient than its competitors that it generates large profits in the same pricing environment that makes its competitors lose money (HWP and IBM for example).

I think we will see a shake out in fairly short order. HWP is undergoing reorganization and IBM is rumored to be restructuring it PC business. CPQ is in deep trouble because it can't seem to get its PC business right. Of the Wintel boxmakers, only DELL and GTW appear to be viable. The others seem to be hanging on at this point.

This is not to say that we might not have a bumpy second half. There is the always the possibility that PCs will see some Y2K budget lockdowns later on -- that's what killed the software companies this year. Alternatively, we may have seen abnormally high demand this past year as companies scrambled to upgrade in anticipation of Y2K hardware problems.

All in all, I see a very rosy future for Dell.

TTFN,
CTC
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