Pats,
Hi!!
It appears to me that Richard Chu of SG Cowen was listening yesterday... I wonder how long it will take the average investor to understand what Jim Vanderslice and Mike Lambert are telling us...
OT is right...It's been checkmate for sometime now...That's if you paid attention...
Best, Kemble
Reuters Finance News
Dell Pledges to Gain Market Share
Apr 5 5:07pm ET
By Nicole Volpe
NEW YORK (Reuters) - Dell Computer Corp. Chairman Michael Dell on Thursday said the No. 2 personal computer maker would keep the heat on in a price war, in a bid to grab more market share from rivals.
Dell, which recently overtook market leader Compaq Computer Corp. in the U.S. PC market, helped to spark a stock market rally when it reaffirmed earlier financial guidance for the current first quarter ahead of an analyst meeting here.
Michael Dell, who is also chief executive, said his outlook was sunnier than most of the gloomy projections tech investors have grown used to during a historic decline in the tech-heavy Nasdaq market over the past year.
"I wouldn't characterize it as ominously as some others have," he said in an interview. "When we talk to our customers we see a continuing use for technology and plans for spending on our products."
In addition, Dell executives said European and other non-U.S. businesses were performing as expected.
Dell shares closed up $3, or nearly 14 percent, at $25-3/16 on the Nasdaq.
While Dell said he would stay aggressive on pricing, he also told analysts he would not rule out other means, such as acquisitions, to gain even greater market share. But Dell, whose company has executed just one acquisition in its history, said he would only consider acquisitions that make sense.
ACQUIRING RIVALS ONE CUSTOMER AT A TIME
Asked about consolidation in the PC sector, the company founder said Dell had already been consolidating the market by offering low prices and stealing customers from its rivals.
"That continues to work very well and we'll continue to do that," Dell said, adding, "We wouldn't rule out the possibility of partnerships or other more significant alliances with other companies."
Dell added, however, that his rival PC makers' higher operating costs gave him pause regarding any takeovers. Certain assets, such as competitors' factories, might be interesting, he said, but only if it would cost less to buy them than to build them.
"It would not be necessarily a wonderful thing for us to acquire these organizations because I am not sure there is a lot to be gained," Dell said.
Dell's lone acquisition, the 1999 purchase of storage systems maker ConvergeNet has been seen by analysts as a disappointment.
The Austin, Texas-based company's claim to fame is its ability to keep costs down by selling directly to customers, rather than through distributors or retail stores.
It especially benefits when the prices of components that make up computers, such as memory chips and liquid crystal display (LCD) screens, fall as they have in recent months. Dell can buy those components at the latest, lowest price, and then sell the finished computer for less.
"There was a lot of discussion about how memory prices dropped very rapidly, and that maybe they are not dropping now," said Dell. "Well now LCD (liquid crystal display) pricing is now dropping so it moves around from component to component."
EXPANSION INTO HIGHER MARGIN MARKETS
Jim Vanderslice, president and chief operating officer, said that there were signs that inventories held by Dell's rivals that sell indirectly were rising, and that component prices would fall.
"We are expecting channel inventories to go up at our competitors, and that components prices will come down again," he said.
"We were projecting the industry had something like eight weeks of inventory prior to exiting the quarter," he added. "We noticed that some components suppliers said that there was increased demand in the last month of the quarter. So we might expect channel inventories to climb."
The company will continue its expansion into the higher margin markets for computer servers, which are the backbone for Web sites and other networks, as well as data storage systems, the company said.
Dell executives pointed to moves to sell servers with 4 and 8 processors, with a 32-processor machine available in about a month through a reseller agreement with Unisys Corp. .
Dell said it was also dedicating more research and development resources to the enterprise, or business, market.
"They are asserting in no uncertain terms that they can attack the enterprise and infrastructure markets, and now they have some proof points," said SG Cowen analyst Richard Chu.
Dell's business in Europe, an area closely watched by investors fearful that it could succumb to the kind of slowdown in technology spending that has hit the U.S. market, is about as strong now as it was in the fourth quarter, Dell executives said.
Paul Bell, president of Dell's European business said the region's operating costs had been lowered as well. "At this point, our cost structure is completely in parity with the U.S." Bell said. |
