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

To: rudedog who wrote (144754)	10/18/1999 10:28:00 AM
From: D.J.Smyth	Read Replies (1) \| Respond to of 176387

rude. he adequately explained the growth market as a whole, including all internet stocks. The parts that go into computers has an index. The index has stayed relatively flat for five years, rising slightly each year. If the index has risen, yet Dell's component prices have fallen by 50%, then other things are at work, such as technological innovation - more parts produced per man hour, etc. What the "inflation index" leaves out is productivity inreases. A loaf of bread may cost 30% (say, $1.30) more than it did ten years ago( $1.00). But, for that same loaf, the factory is able to generate 70% more loafs (production has gone from 1000 loafs per man to 1700 loafs per man) per month. (Assume wages have also increased 30% along with technological innovation costs to produce the loaf.) So, a factory in 1990 could produce 1000 loafs for $1000. They can now produce 1700 loafs for $1300. The actual production cost per loaf is $.76. Although a simple example, it is true when applied to computer systems per increased man hour and output per motherboard. So, although ASPs have been falling, production costs per system on a chip have also fallen. Demand for PCs are also increasing as is the demand that PCs perform more functions than they do today. People want PCs to obey voice commands, vacuum their floors, do their hair - this all comes through innovation and increased demand per technological unit. If the PC were a static unit (without much intelligence), such as the TV, and failed to change over time, then a falling ASP without effective change is worrisome. This clearly has never been the case - not for the PC.

To: rudedog who wrote (144754)	10/18/1999 10:37:00 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 176387

I thought hdl's post was just a comprehensive list of every argument made in the last year about why DELL's hypergrowth is in the past - rather than an attempt to present a case. I think HDL could benefit from a nice read like Inside the Tornado to see that just because the PC has been on Main Street for many years doesn't mean that the idea of whole product +1 marketing that Dell has targeted so well in the corporate market is such a bad thing. In fact, reading the book confirms that Dell and team have indeed taken the appropriate execution steps to put them where they are today. A little help from Compaq's woes (as well as choices) only helped and the annuity effect that Dell has created in their core market is set. Really set. We could certainly hash the arguments back and forth for many years to come. We know the PC is a commodity business. Nobody has every argued that. It was such before Dell made its big move from 1995 to 1999. Dell's business model was designed to manage this better than any other as ASP's dropped. However, Dell made many excellent niche whole product +1 moves to develop a customer base who would be willing to pay a little higher ASP (especially pragmatists and conservatives) than other companies could provide. I would rather see 'attack' arguments based on things like how long is the PC Technology Adoption Life Cycle going to last? What is the killer app that is going to cause paradigm shock? Where are we in the evolution of the whole product and what does the IBM out sourcing service contract represent within that evolution? In the meantime, Dell has executed most of the proper steps (even overcame some mistakes) throughout the cycle to create the annuity effect in terms of customers for life. They nailed the pragmatists and really nailed the late majority of conservatives thanks to all the industry buzz. Those are the customers you want. Lifers - most of them. There are plenty of laggards and skeptics in the world that haven't even entered the PC cycle yet. However, they aren't future customers - just critics. So, if you are going to be a bear - fight with some ammunition that is well founded. If all these corporate customers are going to stop spending for technology (current being PC technology) - tell us why. Prove their needs to not increase productivity through the use of technology. Prove why Dell's business model will not be successful at surviving the declining ASP's. Interesting that HP is still around when laser printers went from $10K to $5K to $3K to $1K then ink-jets from $1K to $500 to under $200. What is the industry buzz towards HP and printers in 1999? What is the size of HP's business in terms of revenues in 1999? BB