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

To: Bill F. who wrote (144271)	10/9/1999 1:11:00 PM
From: JRI	Respond to of 176387

Bill, additionally one has the look at this entire problem in context of the overall competitive environment..if all boxmakers are facing similar (Taiwan) problems...and as Michael Dell would have you believe, Dell is in a better position than most (others)to overcome them....then Dell could, in some ways, come out ahead here.. You are assuming that all boxmakers will keep their offerings the same (unable to change/raise prices- due to the competitive environment)...and "eat" the component price increases (thus, affecting margins)......what if, similar to the last few years in which while component costs went DOWN, prices went DOWN.....what if now, while component costs are going UP (to what extent, we don't know) all boxmakers RAISE their price (in unison).....or, as MD has inferred, some (Dell's competitors) have had to raise their prices more than others (Dell) because they stand further back in the queue (to get components)... Maybe all boxmakers will RAISE prices to keep margins intact...certainly CPQ, HP, and IBM have shown a real unwillingness (as of late) to sell boxes way below cost... unlike '98 (when they, in turn, tried to take Dell on..) Now, you may say, "well, if they all raise their prices (of their boxes), then unit sales will fall"....well, antecdotal evidence on Q3 unit sales would not support that...additionally, we are then getting into price elasticity issues in which none (few) of us are qualified to answer (although Rudedog did a terrific job in giving a synopsis of the issues at hand the other day)...in any event, demand/price elasticity is a much more complex argument than saying "if prices rise, demand is sure to fall"... Finally, are you really (at all) familiar with some of the long-term contracts Dell has in place (to receive components at certain prices/certain delivery dates)?? I leave you with one last story...in a previous life, nearly a decade ago, I was looking into an accounts receivable problem our company had with Wal-Mart...it seemed that Wal-Mart always paid late, always took the discount (regardless if they had met terms), and that our company had left a substantial amount of money on the table (in unreceived revenues)...when I inquired about why we weren't going after them....the clerk said "Because they're Wal-Mart...we can't do anything".. I would be surprised if Dell doesn't have similiar leverage with its suppliers...