Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: arthur pritchard who wrote (142388)	9/20/1999 1:10:00 PM
From: Happy Cat	Read Replies (1) \| Respond to of 176387

--OT-- Dell's direct model used for car sales. Here is an article I found on the Motley Fool Web site, www.fool.com. You Want a Beanie Baby With Your Mustang? By Bill Mann (TMF Otter) (TMF Otter) September 20, 1999 Microsoft (Nasdaq: MSFT) and Ford Motor Company (NYSE: F) are expected to announce a collaborative effort to build Ford vehicles to order using Microsoft's CarPoint website. The Wall Street Journal reports that the Ford-Microsoft alliance is to be announced at a joint press conference today in San Francisco. The collaboration will allow customers to input a car order and then have it matched with a dealer. Federal franchise law restricts car manufacturers' ability to sell cars directly to consumers. However, this agreement once again shows the power that e-commerce has over traditional manufacturing industries. Where the car manufacturers once competed to maintain operating efficiency to build their profit margins, they are now counting on e-commerce to aid their distribution efforts by cutting inventory, profiling customers, and utilizing this information to more efficiently manage wholesaling efforts. The deal will have Ford taking a joint venture investment position in CarPoint. CarPoint expects that other auto manufacturers such as Honda Motor Company (NYSE: HMC) will follow suit and invest as well. This type of model has been perfected in other industries, most notably in PC's, with Dell Computer Corporation's (Nasdaq: DELL) much-copied direct sales model. This model is being replicated in other industries with significant distributive inefficiencies caused by an obsolete distribution system, including insurance, software, investments, travel products, and even chemicals. Can cars be that far behind? Car companies have been looking to shorten their lag times between the initiation of the manufacturing process of the car and the realization of revenues. The shortening of this cycle, to the magnitude of days rather than the current weeks, would drastically improve the companies' cash flow models. For Microsoft, this collaboration is yet another one of the items it is using to add synergy between its components. In this case, CarPoint is an independent entity under the Microsoft corporate umbrella, competing with several stand-alone car websites, most notably autobytel.com (Nasdaq: ABTL) and autoweb.com (Nasdaq: AWEB). Neither of these companies have been able to attract an alliance with a manufacturer, and as such the Ford collaboration and those expected to follow at CarPoint give it a significant competitive advantage. Auto dealerships have long been wary of this sales model, as it threatens to make them obsolete as the point of sale to the end customer. There are a few companies offering direct sales models for autos, most notably CarsDirect.com, but this currently accounts for a tiny fraction of all car sales. Consumers will have the ability to access the build-to-order capability through CarPoint as well as Ford's own websites. These Ford sites will be switched over to run off the CarPoint platform. In the future, consumers will be able to order a car from a "cafeteria menu," including paint colors, interior, accessories, and other customizable features. In return, Ford will have instant access to a searchable database giving them feedback as to what types of cars consumers want.

To: arthur pritchard who wrote (142388)	9/20/1999 2:10:00 PM
From: rudedog	Read Replies (1) \| Respond to of 176387

arthur - I think Gerstner's thinking is correct, and the naysayers are just in denial about the way the industry has moved in the last 10 years. IBM is a technology powerhouse and that technology will yield a lot more value to IBM if it is broadly deployed. The notion that one can develop a proprietary hardware advantage which will justify the R&D cost without broad industry deployment has been disproved again and again. The Forbes article is full of rather silly statements about the risk of selling to rivals. For example - . In September 1997 IBM hailed a breakthrough in using copper instead of aluminum to carry current on a chip. The new design let chips run 30% faster yet use less power. Apple Computer was first to deploy the breakthrough, in a new desktop unveiled last January--four months ahead of IBM. Does the author think that IBM sells MACs? In what way does Apple compete with IBM in the hardware space? If the IBM product divisions, with better and earlier access to IBM technology, can not make competitive products in a timely way, then a few months of technical advantage will not save them. On the other hand, getting IBM technology in the hands of producers who CAN get it to market will be good for IBM. Intel has managed a quite successful business with no end user products at all. There is copious precedent for companies to make technology widely available in order to have that technology become "standard". Once standardized, the technology becomes a core part of the industry, like say Windows or the X86 architecture. IBM is not giving away the technology - they are giving access to it. I don't think this is any kind of "end game" strategy - just the opposite. This is a way for IBM to shift away from areas where it is increasingly uncompetitive and into areas where its capability is unmatched, which ought to ensure continued growth and good margins. The operating principle here is that 5% of everything is better than 100% of nothing. Gerstner's "barbell" does not mean that IBM has to exit any of its current product markets - but it does mean that they could do so if those businesses are not good for them.