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Technology Stocks : Dell Technologies Inc.

DELL 138.94

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Dec 5 9:30 AM EST

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To: kemble s. matter who wrote (130543)	6/2/1999 5:05:00 PM
From: jim kelley	Read Replies (1) of 176387

Kemble, IMO: DELL cut its prices to capture marketshare. CPQ is certainly one of the companies that they can capture share from. Recent comparisons of the DELL Dimension products with comparable Prosigna's puts DELL at lower 7 to 10% lower prices for equivalent product. This is a turnabout from Q3 when DELL allowed CPQ to meet its prices for similar Prosignia product. "And is this perhaps a part of the long term strategy for making a bold attempt at further consolidation in the PC business? " Certainly, DELL pricing actions are consistent with their long term goal of 25% of the PC business. This goal necessitates the consolidation of the industry. "That is....could DELL easily have made 18 cents if they hadn't chosen to cut CPQ's throat....leaving them vulnerable for the remaining quarters,etc.?" Well, DELL could have made the 18 cents this quarter if it had paid closer attention to the European market. Something went wrong in Europe. Remember CPQ/DEC is relatively stronger overseas than DELL. DEC always was a stronger player overseas compared to most other US companies. There is no quick way to slit CPQ throat. The unwinding of CPQ will take many quarters. However, DELL can take advantage of the CPQ situation by continuing its practice of highly competitive pricing and getting to market with new products quicker than HWP, CPQ, IBM, etc. If you have the latest and the greatest it is easy to displace the competition if attention is placed on supplying a better overall package to the customer at a lower cost. Another way of looking at this is to assume that CPQ stopped producing PC's tomorrow. In that event , DELL would not have sufficient plant capacity to absorb the all incremental business. They could absorb some but not all of the business. So it is better for DELL that the unwinding of CPQ proceed over many quarters such that the incremental business can be absorbed. A key issue in the competition at this point is package pricing in the corporate enterprise contracts. We have little visibility of this. In summary, I see DELL continuing with its long range plans and paying closer attention to the tactics that it needs to pursue to arrive at its goals. Regards, Jim Kelley

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