SI
SI
discoversearch

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 : Hewlett-Packard (HPQ) -- Ignore unavailable to you. Want to Upgrade?


To: Kirk © who wrote (2038)10/25/2002 12:22:08 PM
From: Dave B  Read Replies (1) | Respond to of 4345
 
Kirk,

I just don't see Dell doing this sort of innovation and competing in that market...

There's an article in this weeks EWeek that has the perfect statement of Dell's strategy. The paragraph reads:

"Many network switching customers are server and PC customers. They really like having one phone number to call," said Kim Goodman, vice president of Dell's networking business. Goodman asserted Dell's approach to networking gear is the same as its traditional approach to PCs. "If it's not fully standardized, we're not likely to have a Dell product."

Dell isn't interested in innovating technology. Their mission is to take commodity or near-commodity products and innovate the customer-satisfaction aspects of delivering those products to the customer (lower price, better service, easy customization [as you pointed out with your own experience of getting EXACTLY what you wanted], etc., etc.).

So not only will you not see them trying to build an Itanium business, the issue also goes on to say:

Another partnership that has also proved somewhat troublesome for Dell has been its relationship with Intel Corp. While Dell has historically relied solely on the company to provide all the microprocessors that power its computer products, recently Dell executives have found themselves at odds with Intel, of Santa Clara, Calif., over the chip maker's design of its first 64-bit microprocessor, called Itanium. The chip, co-developed by HP, features a new architecture that is largely incompatible with existing Windows-based applications. Dell executives privately admit they would have preferred a chip design that was fully compatible with existing applications.

"This is a raging debate that is going on right now," Dell said.

Advanced Micro Devices Inc., of Sunnyvale, Calif., plans early next year to introduce a server chip—called Opteron—that will preserve compatibility with existing applications. Although, analysts said, a Dell decision to adopt Opteron would anger key partner Intel, Dell officials said they are considering it. "We are evaluating that technology and will have a definitive response by [year's end]," said Holt.


I believe Dell is happy to let HP and everyone else fight over standardizing new technologies and then enter the market once the blood has been shed. Usually, the highest profits are made in the early days of a new technology, before too many competitors enter the market and prices come down as the technology gets commoditized. So companies have focused on bringing new technologies to market to get these "extraordinary" profits. But Dell has found a way to get their profits after the product has been commoditized through optimized manufacturing and by cutting out the distribution channel. It's a very different model, even though it still looks like they're a "technology" company.

The marketplace can handle both types of models. We need companies that will innovate and will gain the profits from that innovation, but they also need to recognize that if they "give-up" when the products reach commodity status, then a more efficient manufacturer is going to take away the business.

I believe HP could do both, but it would take a complete whack on the side of the head with respect to their manufacturing and delivery mechanisms.

Dave