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

To: Mike Van Winkle who wrote (148480)	12/4/1999 12:29:00 PM
From: rudedog	Respond to of 176387

Mike - I think you misunderstand my position. This discussion is about DELL's entry into the consumer business and the pressures they will face - in that discussion, CPQ is only a reference. re: I can see you strongly feel that CPQ's approach for building and selling products to the consumer (the end user) is superior to Dell's approach. DELL does not HAVE an approach yet, they are not currently in that market. As recently as last year, they were saying that they had no intention of going into that market. They have been convinced by a number of market factors to change that position. The notion that DELL can leverage its brand image and sales infrastructure to develop a direct consumer business is untried. Currently more than 80% of the consumer business is done via brick and mortar retail. DELL has committed to significant demand generation activity to change that mix, and also intends to provide a compelling value to consumers which will cement the sales once they start to make inroads. DELL may develop a business model which is superior to CPQ's in the consumer space - after all, their core strength is business model analysis and development, and there is no reason to think they will not create a ground-breaking offer for consumers as they did for the commercial space. In that context, the dynamics of the consumer market, the business model of CPQ, who currently dominates that space with more than 40% of the market, and the question of what competition in a very low margin, high volume segment will do to DELL's overall business are certainly important to discuss by anyone who wants to understand what this initiative may do to DELL going forward. I am certain that these questions have received intense attention inside DELL, as reflected in the organization changes, the top-notch talent they have put on the job, and the changes in position that DELL's competitors are making to counter DELL's entry into the market. Putting your head in the sand, pretending that this business is anything like DELL's current mainstream business, or that the competition is similar in strength and weakness to the commercial segment, just clouds the discussion. My opinion is that DELL will get some of the current direct consumer business and will also cause a shift in the demographics which will change the ratio of brick and mortar sales. The whole of the consumer business is currently about $15B. If DELL gets 20% of that in their first year, they will be doing well - that is about $3B incremental for them. My assumption is that the mix will shift to maybe 70% brick and mortar and 30% direct, with DELL dominating the direct business. But IBM and GTW are also in that space next year - is it realistic to think that DELL will, with its first effort, get twice as much business as those two combined, when both IBM and GTW have established brands and at least some customer loyalty? I think so, but it's not a walk in the park.