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

To: TigerPaw who wrote (142601)	9/23/1999 9:58:00 AM
From: rudedog	Read Replies (2) \| Respond to of 176387

TP - I think as a general strategy CPQ does plan to place less reliance on the PC and volume server business. Already about half of their revenue comes from other than the PC and Intel-based server business. But still, that business is big - especially the servers. Unlike IBM, CPQ is dominant in servers and worldwide, also in Desktops. As a general strategy, the ability to maintain a business model in the face of changing industry dynamics is a plus, although poor execution has kept it from working in CPQ's case. It is important to recognize, when analyzing CPQ, that their problems came from poor cost control in the high end DEC lines, not weakness in the "compaq classic" business. If they are successful in consolidating those high end lines and reducing costs there, they will have a well-balanced portfolio with profits coming equally from high end sales, services, and "classic" products. In some ways this is also the strategy that DELL is working - but DELL is concentrating on the second leg of this three legged stool, the services piece. They appear to be heading towards a 10% contribution from services. To have good diversification without a high end line, they need to get that to maybe 20% or 25%. This is the basic flaw in Kemble's "we will suffer pain to cause much pain" argument. If DELL wants to create price pressure, they don't have the diversification that IBM, HP and eventually CPQ enjoy, and instead must rely on base efficiency. They have done that pretty well so far but if component prices stabilize, DELL will need an additional offset such as the services revenue to be able to maintain the pressure. BTW, I also expect DELL to start building the "third leg" - but probably through an OEM or partnering deal rather than acquisition or internal development. With Sequent off the table, Unisys seems like a better partner for DELL if they want a box which can compete in the Sun, HP-UX and IBM high end markets, since the Unisys technology is Intel based and Intel could probably help make that work for DELL. That would also make sense given DELL's storage investments. But that is pure speculation on my part, time will tell.