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

To: kaka who wrote (163980)	2/8/2001 2:22:33 PM
From: rudedog	Read Replies (2) \| Respond to of 176387

kaka - I assume you mean how do I think DELL plans to build the next layer of their business, since what I would like them to do has little investment bearing. I see DELL backing away from any change to their successful business model. This means that they will concentrate on optimizing unit growth in the markets where that model has been most successful - the "english speaking" markets. They will be able to continue gaining PC share with that strategy, but they eventually must "tune the model" to make inroads in other parts of the world, which I believe they will do. That will probably mean a multi-tier strategy in some other parts of the world, which has been the stumbling block in the past as it gives less leverage to the direct model, implies carrying inventory with all of the issues that have plagued DELL's competition, and adjusting street expectations around the inevitable shifts in financial performance that such a move entails. But clearly DELL can not remain out of the top 5 in key markets and still be the undisputed owner of the volume space, so they will have to go down that road. In the server space, DELL has sold well in markets which "fit the model" - primarily 1 and 2 way systems. These are now bought much like PCs - it is assumed that one is much like another, and so the same values that DELL brings to the PC space - configure to order, good service, a reliable brand with good out-of-the-box experience, and best pricing - also work in that market. The 4-way market is still dominated by more complex installations where various "outside the box" components are a requirement, and DELL's penetration of that market has been slow. If in fact they do not make an attempt to develop the additional capability offered by their competitors, they probably intend to commoditize that space with "appliance" offerings which benefit from the configure-to-order capability but still can do more complex jobs. That will eventually get traction, driven in part by the commoditization of that market with Intel's help. The 8-way space is a lot harder, since those machines are designed to compete with the lower end of the"big iron" market, which is a high touch market. With the introduction of Intel's "Foster" chips, 4-ways effectively become 8-ways, and 8-ways become 16-ways. I doubt that the dynamics of use change much. So DELL gets carried into the 4-way space since it is really the morph of the 2-way space due to Foster. But the barriers in the 8-way and higher space don't get any easier to cross. Most disappointing is the storage play. Storage is split into 2 areas - attached storage (vendor-specific storage which gets attached to that vendor's servers), which tracks closely with server sales, and "multi-vendor" storage, where the storage exists in a separate fabric from the servers. The latter is a very hard market defined by lots of software development, specialized hardware, and a big services component both in pre-sales and in the delivery of the products. Without significant investments in several areas, DELL is not at all credible as a storage vendor in the second category, which is increasingly dominated by EMC, Compaq and IBM. DELL has some pieces/parts which could play in that space, but it will be many years before that market becomes stable enough for "generic" SAN components to have any significant play, and so DELL may tell a storage story but the real sales are all attached storage on DELL servers, which really amounts to a different accounting for server sales and not a storage business. As far as the Unisys deal, these are systems which by most estimates will sell in the hundreds of units annually, so they are pure "stake in the ground" marketing plays with no revenue substance. I believe that DELL did their deal because Compaq and HP had already done so, and DELL rightly recognized that this was an advertising expense, not a product offering.