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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Devil's Advocate who wrote (66798)	8/19/1999 10:47:00 AM
From: rudedog	Read Replies (2) \| Respond to of 97611

re: From what I know, they declare more then 100% growth in the consumer segment They are growing from a very small base in consumers, so they should be showing 300% growth if they intend to get reasonable share (as they did in servers the first year they were in the market). On a percentage basis they are almost not in the game. Their strategy has been to up-sell and not care too much about first time buyers, who are both more expensive to acquire and to maintain. Their low price offerings are at about a 50% premium over the consumer space competition. There is a reason for this. Consumers, especially first time buyers, are much more likely to take a "package" that has most commonly used features and capabilities. They have less firm ideas about exactly what they want and the lure of getting a lot of stuff (which they can sort through later) at a low price is greater than the lure of "configure to order" since they are unlikely to know what features they would pay for. The "package" concept is more amenable to retail stocking and allows low production costs and low maintenance costs as well since field configurations are well understood. DELL has no easy way to do low cost volume production - everything comes out of the JIT line whether there is a need for configuration or not. There have been a number of pretty good looks at this issue over the last few years. Take a look at DELL retail sales - if you can find them, they are usually off the bottom of the charts. Then look at the percentage of first-time buyers who purchase at retail, and the percentage of second time buyers who repeat their original buying pattern. DELL has done well with this strategy over the last few years but as their other desktop markets begin to level off they will need to address this problem.