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Technology Stocks : Dell Technologies Inc.

DELL 117.42

-1.7%

3:59 PM EST

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To: Byron Xiao who wrote (119357)	4/20/1999 3:43:00 PM
From: Kenneth Aird	Read Replies (3) of 176387

Shorting Dell has never been a good idea. Dell has faced many challenges much worse than the current price war. The last time Dell touched its 200 day moving average was 1996, and I believe that was the year they had their only quarterly loss due to DRAM inventory problems. They are hardly losing money now. In the commercial segment which is still the bulk of Dells revenue, the price war will actually work to Dell's advantage as they can drop prices faster than anyone else without losing money. Dell is actually initiating the price war in servers and storage in order to undercut the ability of competitors to lose money on desktop PCs and make it up on high priced servers. Michael explicitly stated this plan in his book. In the business market, cost of ownership is far more important than initial purchase price. The total cost of ownership over the life of a desktop PC far outstrips its purchase cost. Dell saves their customers millions just on overhead in their purchasing departments by automating the purchase process, not to mention eliminating the cost of distributing machines to branch offices and loading custom hardware and software. In the consumer market, Dell has a way to go to compete for unit market share with eMachines and Apple. eMachines seems to have a viable model in the form of "disposable" computers. It remains to be seen how loyal their customers will be. Apple has a hit with style and color, but cannot handle the inventory problems posed by indirect distribution of multiple colors. Dell will not have this problem and can provide more customized options at lower prices than Apple. Finally, the Dell model of internet distribution gives them access to market data that indirect vendors cannot get at all, let alone in a timely manner. NEC and Compaq have proven that the indirect vendors will not be able to go direct in the consumer segment (some may eventually manage it in the large corporate market, where direct has been the rule in the past, but not with all the elements of the Dell model). The CEOs of many world class companies regularly ask to meet with Michael Dell to learn the secret of his success. Would they do this if his model were obsolete or they thought he had lost his edge? Is that enough reasons? If not I can go on :) Ken

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