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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (5684)	9/29/2002 9:37:20 PM
From: robert b furman	Read Replies (2) \| Respond to of 95546

Hi Cary, A short real story, In 1989 my dealership purchased a software package along with a "very small Mainframe computer". The cost was $200,000. A sizeable investment fora sotre our size . We are also a Chrysler store at another town and Chrysler is pushing an upgrade in their communication systems as well. We are analyzing multiple vendors ,but to make a long story short - our next purchase will be a web based system. The software has been around now for years and good systems are developed by several vendors - the sparkle of good software is now quite standardized and side "nice features" include CRM and communication (letters and such) capabilities. What we currently pay for software and hardware maintenance is around $3500. per month. The new web based software charges will now be $700 - $800 / mnoth. What we now have to do is build a network which links computers (the faster the better)at 36 ports to a server which will comunicate to one central mainframe(nationally). Cost of building our network will be 70 to 80 thousand and my monthly maintenace is cut by 75%. Maintenance on cheap computers and some nice printers is no longer justifiable - just buy a new one (actually stock several spares and use as needed). I share this as there are 5800 GM dealers - I'm guessing another 5000 Ford and 4000 Chryslers? All will be facing the manditory upgrade starting January -AT THE EARLIEST. The standards were developed jointly by all three manufacturers dubbed "Olympus". As the cost of PC's has been forced down ( remember when the world would end with $1000 boxes),new web based systems are spreading efficiencies to many smaller tier businesses. Instead of buying a mainframe and keeping the expensive computer locally - we now buy am much less expensive server ( $15,000) and hook it up to a broadband connection(dsl in our case - our only available type of broadband). The big bucks mainframes are networked to many remote locations. This adaptation to new technology will require that we purchase about 20 new computers at one store and about 15 in the Chrysler store. This will double the number of PC desktops in both facilities and we ahve been progressive in offering most employees nice Dell Computers if needed. It is the evolution of servers becoming cheap and computers becoming cheap - that will drive a huge boom of pc purchases, as these types of installs work their way down to MANY smaller tier businesses. With high end production techniques being stalled and/or already being highly utilized - I don't think a reversal of Capex (leading technology) expansion is too far off- say 03. This is just one example associated with Automobile franchises. I have no doubt the grocery stores' retail outlets' franchised food stores,auto parts stores,drug stores, will all be making a similar transition. Fortunately the 9/11 depreciation law will allow me to depreciate 30% off the purchase price of equipment during the first year( a 12% discount effectively). We will spend half the cost for a full blown maxed out network and reduce our data services expenses by 55-75% (with the need for some outside assistance for upkeeping our network??) and also reduce our forms expense by about $1500 per month as our printers will be adding our Logo to plain bonded paper for things like checks and sales invoices in parts,service, new, and used finance departments. I'm thinking the PC slow down and it certainly has been protracted one is about to have a fresh leg up. It won't be from an upgrade cycle it will be from the new applications and efficiencies that small firms (as large firms have already enjoyed) embrace the much cheaper web based services. So don't write off PC quite yet - the very slow buildout of the broadband is about to provide us with what we all thought was just around the corner in 2000. Interestingly enough Southwestern Bell wants to provide the dsl line - if they can also take our business away (competitively) from a clec which we have saved a ton with.The clec hase just announced they are going into bankruptcy,for reorganization. The ma bells are nailing in the last nails of their upstart competitors coffins. The evolution of another cycle is alive and well. I believe it will be announced just when almost all players declare the industry dead upon arrival, thay a new cycle miraculously is evolving. It's never really any different is it ?- it just took longer as the last blowoff cycle was exceptional. Hope this helps us all maintain a positive viewpoint towards the viability of our favorite sector and its undeniable ability to reinvent its next growth cycle. Bob