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Technology Stocks : Dell Technologies Inc.

DELL 118.47

+1.0%

Jan 29 3:59 PM EST

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To: David Harker who wrote (117061)	4/13/1999 3:17:00 PM
From: Chuzzlewit	Read Replies (1) of 176388

David, you are missing a couple of points. First, there is a tradeoff between volume and overhead burden. The more units you crank out, the lower your cost because the factory burden is spread out over more units. Manufacturing efficiency is the key here. Second, you have the issue of transfer pricing. Most companies set up transfer pricing for components internally produced. It may very well be that PC guys argued that internal pricing created artificially high costs for components, and that they were actually contributors to IBM's bottom line because they were subsidizing the component side of the operation. The deal isn't between the PC group and the component group, it's between Gerstner and the PC group. He allows them to make the argument, then says show me or you're toast. TTFN, CTC

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