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Technology Stocks : Dell Technologies Inc.
DELL 133.180.0%12:59 PM EST
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To: rudedog who wrote (121989)5/4/1999 10:38:00 AM
From: Chuzzlewit  Read Replies (1) of 176387
 
Rudy, I believe I do understand what CPQ attempted. In essence, they were trying to move into the high end turf of companies like IBM with a combination of hardware and services. And they attempted to buy their way in with acquisitions like DEC and Tandem. But they were also interested in expanding into the low end (sub 1K machines), while at the same time holding on to the retail market. In other words, they were attempting to be all things to all people.

True, the high end is not channel dependent. But hardware like corporate desktops, sales to VARs and retail are. And those are the precisely areas that provide the major sources of cash. Right now DEC exerts a net cash drain. So to fail to rework that portion of the business which does rely on channels prior to initiating a buying spree was the first mistake. Toss in a lot of arrogance (note how poorly Compaq rates on retail customer service polls) and you have a prescription for disaster. There were other mistakes as well -- like entering into the sub 1K market without recognizing the potential for cannibalization of existing product. But I want to focus on the biggies.

The key for this company vis a vis competitors like Dell is to go direct, thereby eliminating the inventory overhang problem and establish a strongly positive cash flow footing allowing the rest of the company to grow in the high end.

TTFN,
CTC
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