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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Lynn who wrote (31072)	4/20/2000 11:04:00 AM
From: rudedog	Read Replies (1) \| Respond to of 64865

Lynn - I also read the $100M vs. $400M comment. I think that was per quarter, not annual - but those numbers don't square with my own calculations, which show DELL at about $275M for R&D in 1999 and CPQ at about $1.8B - i.e CPQ out-spends DELL about 6 to 1. There is a big difference in the type of R&D also. According to a friend of mine who is a DELL executive, almost all of DELL's R&D money is spent in 2 areas - manufacturability (designing the way PCs are put together to minimize the time and effort involved) and serviceability (making the boxes easier to repair). The rest of the R&D work is in mundane areas like testing for compatibility with the various software products DELL ships. CPQ on the other hand does basic research in a variety of areas, designs the Alpha processor, designs support chipsets, designs custom memory silicon, designs caching architectures, worked closely with IBM and HP on "Future I/O" which is now the basis of the infiniband I/O architecture, and does substantial invention in storage systems design. I continue to be amazed at the naive belief that somehow DELL will, probably by a miracle or other act of God, develop the engineering depth, services capability, and architectural influence that it would take to challenge Sun, but without abandoning their highly leveraged business model, and without demolishing their historically high ROIC - which is so high because I is small, not because R is big. My opinion, which I expressed on the DELL thread, is that this is just "magician's patter" designed to distract the investment community from the fact that DELL's growth will slow to something much closer to industry growth, that 80% of their revenue still comes from an increasingly commoditized PC business, and that their business model does not let them change the game without taking a year or so of unusual financials, with all of the things DELL has touted taking a hit - lower growth in both revenue and earnings, lower ROIC, lower net profits, lower ASP. DELL's statement that they are already looking at CPQ in the rearview mirror seems a little premature, given that CPQ sells more than twice as many servers as DELL, and is still the worldwide leader in PC sales as well. It looks to me like DELL is saying "PAY NO ATTENTION TO THE MAN BEHIND THE CURTAIN"...