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

To: kemble s. matter who wrote (158030)	6/19/2000 1:09:00 PM
From: rudedog	Read Replies (1) \| Respond to of 176387

Kemble - re: "at half the cost" - In 1998, when CPQ was selling completely through the channel, most estimates placed the differential in distribution costs between CPQ and DELL at 9 to 11 points, about 7 points of that providing the margin for the resellers, and the rest giving price protection to the channel. Elimination of the price protection and a reduction in margin allowances dropped that to about 5 points - this was the main driver of the reduction in losses for CPQ's commercial PC division. The transition to direct removes additional differential - with 40% or so of CPQ desktops going direct, the difference in distribution costs is probably closer to 3 points now. I'm not sure where "twice the cost" comes from - probably this refers to twice the manufacturing costs. One of the reasons CPQ was able to compete despite the higher cost of distribution prior to 1999 was that they had lower costs for both hardware and software, but DELL has achieved the volume to qualify for top tier pricing. My current rough assumption is that CPQ and DELL are at parity on component costs - assuming that CPQ does not still have an edge. So the DELL cost advantage would be in reduced inventory carrying costs - perhaps a point or so, and in reduced manufacturing costs. That might translate to a total of 3 or 4 points. Looking at DELL's net margins for the last few quarters (about 7 points) versus CPQ's (maybe negative 2 heading to zero) supports that analysis - 3 points in distribution and 4 in manufacturing. Still 7 points is a nice edge, and even if CPQ went 100% direct in their desktop business, that would leave DELL with maybe 4 points. A decent advantage but not a killer obstacle for CPQ, especially given that DELL still has 80% of their sales in that segment, while CPQ has less than 30% there.

To: kemble s. matter who wrote (158030)	6/19/2000 5:37:00 PM
From: calgal	Read Replies (4) \| Respond to of 176387

Advice: Michael Dell on investing Dell: Businesses should see Internet as tool of the trade usatoday.com The reason Michael Dell's advice about the Net is sought by corporations worldwide may have something to do with the $40 million in sales his company makes each day online, far more than second-place Amazon.com. If the Dell.com division of Dell Computer were a stand-alone company, it would be in the Fortune 100. Some analysts are starting to warn that Dell Computer will not be able to maintain its pace of growth, but there are few signs of slowing. Dell had 24,400 employees less than a year ago. Today, it has 36,500. About Michael Dell Milestones: At 27, he was the youngest CEO of a Fortune 500 company; he was a billionaire at 31. What he's worth at 35: $17.8 billion, according to Forbes. Family: Married, four children. Started it all: With $1,000 in 1984. Dell Computer was profitable from day one. He dropped out of college to start the company. ''My parents were very upset until I showed them my first financial statement.'' If you were 19 today: ''I would do something on the Internet.'' Voting for: George W. Bush, fellow Texan. Dell has contributed to the Bush campaign, becoming politically involved for the first time. Michael Dell on: Why PCs are unreliable: ''The thing that makes a computer different from other appliances is that it's not a fixed-function device. A VCR camera doesn't get upgraded. A PC changes and evolves.'' The future of PCs: ''It's hard to predict beyond five years. We consume information visually, so the visual display will not go away. It may be latched onto your eye, or be on the wall and roll up. Speech recognition will come into play.'' The death of the PC: ''Greatly exaggerated. To people who say the phone will replace the PC, I would point out that the screen size is a little small to get a huge amount of information.'' Viruses: ''This will continue to be a cat-and-mouse game. You've got to have laws that say shutting down a computer system is like shutting down an airport. From a technical standpoint, I think solving the problem is not all that hard.'' Worker shortage: ''You can't just take them from other companies. Increasingly they have to come right out of school.'' The digital divide between rich and poor: ''If we don't teach kids in school, it's not a completely lost cause, but it's tough to recover. There are still places in the world untouched by the Industrial Revolution.'' Using online direct marketing, Dell Computer doesn't make anything until the order comes in. That saves a fortune on inventory costs. And you won't see a Dell computer collecting dust on a retail shelf, where the computers of other companies lose 1% in value each week they sit unsold. Dell, founder and CEO, 35, just returned from London and Paris where he spoke to audiences of old-economy European CEOs searching for Internet strategies. USA TODAY management reporter Del Jones recently interviewed Dell about the Internet. Q: Not long ago, you had to warn companies to get an Internet strategy. They've certainly done that. But have companies now taken it so seriously that they've overreacted? A: When electricity first came out - I wasn't around then - companies were really concerned about what it would mean to their business. They created positions like vice president of electricity to figure out what it means. That position went away. Q: What's the biggest mistake companies make? A: They see the Internet as separate. But it's really a tool. Just like the telephone or fax machine, it allows business to be conducted with much greater efficiency and speed. It shouldn't be partitioned into one part of the company. It must be integrated. Q: Any other common mistakes you see? A: Most companies have a lot of inside information that they protect and don't share with anyone. The right answer may be to share it with customers. We developed a lot of information so that our technical staff could support customers. It was one incremental step to put it online so any customer could access it. Customers can type in a question and get a very specific answer. Of course, the goal is to prevent things that cause customers problems. But we can do that better also because we have more data. Q: Is Internet growth slowing? A: No. In five years, there will be 20 times more servers than today. Q: Dell Computer has established individual Web pages for 40,000 of your customers. That seems like overkill. A: We have sites like GE@dell.com, which nobody can access unless they work at GE. When you're selling a couple hundred thousand computers to GE, it's a very complicated relationship. They have special pricing. Like every company, they have guidelines and rules. If you're an engineer, you get one kind of machine. If you're a scientist, you get another. The Web site helps GE drive those standards. We link our system to their system to get a frictionless, paperless flow of information. Q: So you would advise other companies to set up separate Web sites for each customer? A: If you have customers that buy on a regular basis where you have an ongoing relationship and the information flow is fairly complicated and varied by customer, it's a great idea. Obviously, there aren't 40,000 really big companies, but we can set up a page over the phone in a matter of minutes. If Biggo Tires in Cleveland calls up and they want to buy 30 computers, we set up a Web page. Q: Most companies may need to build an Internet infrastructure vastly larger than they could imagine using. Dell Computer handles 10 million e-mails each month. Are small companies like towns with one traffic light that suddenly need to build a 10-lane freeway just in case? A: I get a few of those e-mails (laughs). Most companies are going to be surprised if they really embrace the Internet how quickly their customers embrace it as a way of doing business. We were surprised. But nobody builds today for 10 years from now. They just add on. Alltheweb.com gathers up content from all servers so you can search any phrase. It has grown from two servers to 400 or 500 servers. Expanding a computer system is easier than expanding a highway. Q: Everyone wants your advice. Do you worry that what Dell Computer has done won't work in other industries? A: Imagine the convenience of ordering a car exactly to your specifications. You choose a color, tires and submit it to the factory. The auto industry has $80 billion in assets; $50 billion of that is inventory. The auto industry today has a 13-14% return on investment, which is roughly equivalent to their cost of capital. It could easily be 35-40%. Dell's is now 292%. Q: Much of the cost savings from the Internet come from removing human contact. Is that always wise? A: The Web takes away the mundane part of the job. Instead of account representatives doing another purchase order, typing in the same information day in and day out, that gets automated. They focus instead on building relationships, finding solutions. The good news for us, and for our customers, is that we don't need as many account representatives. It would have been impossible for Dell to build a $30 billion company in 16 years had we not connected ourselves (online), using information from customers and suppliers. Q: Intel Chairman Andy Grove recently said e-commerce should not be exempt from sales taxes. What do you think? A: It's a complex question. This is often considered a state-to-state debate. If we're going to have a new tax system, we have to consider that all products aren't going from one state to another, but from one country to another.