Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Elwood P. Dowd who wrote (93779)	11/17/2001 1:44:24 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

Courtesy of "skep" at The Zoo: Dell gains on rivals; earnings sales slip By John Pletz American-Statesman Staff Friday, November 16, 2001 Dell Computer Corp. continued to gain sales from its rivals in its third quarter and posted relatively strong results, given the continued weak demand for personal computers. The world's No. 1 PC maker said Thursday it had $7.5 billion in sales during its third quarter, down 10 percent from a year ago. However, earnings were down 36 percent to $429 million, or 16 cents a share, reflecting the brutal price competition among computer companies. The earnings were at the high end of Dell's previous forecast and a penny better than Wall Street expected. The company says the decline in PC sales is beginning to stabilize in the United States and possibly in Europe, although both markets are still much weaker than in recent years. Executives still don't expect demand to rebound until about the middle of 2002. "For any overall market turn for next year, it's still too early to call," President Kevin Rollins said. "We think there is potential for a late spring or early summer uptick." Wednesday, market-research firm IDC again lowered its forecast for worldwide PC sales this year to a 6 percent decline from previous estimates of 2 percent. "One thing to recognize is: You're seeing the worst white-collar job purging in history," said Ashok Kumar, an analyst at U.S. Bancorp/Piper Jaffray. "That has a big negative impact on IT spending. There's a high correlation between white-collar job growth and demand for PCs." IDC said this week that technology spending will be up just 1 percent for 2001, compared with 12 percent a year ago. However, some analysts and market observers said October PC sales were much better than August and September, declining just 7 percent from a year ago compared with drops of 41 percent and 29 percent during the previous two months. But Rollins said Dell wasn't seeing any noticeable change yet. In the meantime, Dell expects continued price pressure in the PC industry during the fourth quarter, which includes the holiday buying season. The company anticipates the number of computers shipped to increase 5 percent from the third quarter, while revenue will rise only slightly. Profits likely will remain flat at about 16 cents per share. Rollins said Dell will continue its aggressive strategy, although it doesn't expect to intensify price cutting. He also discounted the idea that Dell's ability to undercut rivals will be diminished by stabilizing prices for components. Analysts said there are signs that component costs, which have been falling about 1 percent a week for the past year, may level off for the next few months. When price declines resume, they'll be closer to historical levels of about half a percent a week. Because of its low inventory levels, Dell can pass on parts price declines almost instantly without cutting into profits. Rollins acknowledged that price declines might slow, "but our estimate is it will not drop quite back to historical levels. The competitive dynamics don't change a whole lot. We've got half the expense structure as our competitors." Dell's third-quarter performance was among the strongest in the industry during an already-weak period that was dealt an unexpected blow by the Sept. 11 terrorist attacks. Like Hewlett-Packard Co., which also reported stronger-than-expected results Wednesday, Dell may have had more time to recover. Its third quarter ended a month later than most competitors, which closed the books just weeks after the attacks. Only IBM Corp., which relies on PCs for little of its overall sales and profits, did better, with a 7 percent decline in profits and 20 percent drop in sales from a year ago. H-P's sales fell 18 percent, and its profits all but vanished, declining 90 percent. Compaq Computer Corp.'s sales were off 33 percent, while its net income plunged 190 percent. Gateway Inc. is in the worst shape, with sales off 46 percent from a year ago and net income down almost 500 percent. Dell has succeeded in cutting costs faster than revenue has fallen -- no easy feat in a market where prices have fallen by about 20 percent in the past year. Through layoffs and other means, Dell has cut $171 million in overhead out of its business per quarter, reducing operating expenses to 10.3 percent of sales from 11.4 percent a year ago. Sales and administrative costs are down 19 percent from the third quarter of 2000. Dell said it completed the last of the 5,700 job cuts announced in February and May during the quarter, and no further reductions have been announced. "We think we have the head count sized very well for the business," said Jim Schneider, chief financial officer. "We look for unit (sales) to grow in the (fourth) quarter." Dell executives have told analysts recently that cost-cutting efforts have reached "the point of diminishing returns." You may contact John Pletz at jpletz@statesman.com or 445-3601.

To: Elwood P. Dowd who wrote (93779)	11/18/2001 7:07:14 PM
From: MeDroogies	Read Replies (1) \| Respond to of 97611

I said that Dell's price war was a huge mistake back when it started. They don't realize the damage they are doing to themselves and the market. It is better to let the bottom feeders feed on the bottom than to try to kill them all in a feeding frenzy. When you kill them all...it alters the ecosystem dramatically and you need to adapt. Not knowing the endgame shows Dell hasn't prepared for this eventuality. If Dell wanted a price war, the best way to do it is to BRAND the Dell name (which they had done spectacularly up til then), and open a low-end name that takes on the low-cost, low margin market. Then you can have the best of both worlds...high margin sales (people willing to "pay for the name") and the low margin arena (general public sales). Dell has killed itself and hasn't figured it out yet.