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Technology Stocks : Gateway (GTW) -- Ignore unavailable to you. Want to Upgrade?

To: Tmanquinn who wrote (4398)	10/28/1997 6:41:00 PM
From: hpeace	Read Replies (2) \| Respond to of 8002

Vincent, CPQ has already planned the price drops and taken the adjustments to sales in a reserve acct. cpq also keeps about 35-40 days of inventory in delaers. price drops will casue a rebate to dealers. that has already been reserved off in 3q. You are a finance type so you understand looking ahead and recognizing a hit and reserving off dollars to accout for it. Cpq is out to conquer retail. at TI Pfief was in charge of the consumer unit. it's his specialty. CTX cut the prce on their premier k6 unit form 1399 to 899. this is just the opening salvo. the lower teir has lots of inventory to move. They will cut prices. Cpq knows it and took as much of the hit as possible in 3q97. They will be ready to drop prices. Cpq has about 1.2 months of inventory on hand and the dealers have another 30-40 days on hand. I think that cost of inventory will have zero to do with cpq cutting prices. They will look at sales daily and drop prices only if they see sales slowing. The reserve they did in 3q is a cushion so that it will not effect 4q profits allot. I do think you are right....gtw turned cpq down and now cpq is going to be number 1 and if it hurts gtw they just say "see, you should have let us buy you" The advantage that cpq has is their manufacturing strategy, their systems, and they buy purchase parts cheaper than anyone. And, a pc is 95% purchased parts.. the rest labor and matls. the last issue is no way gtw competes with cpq's SMT expertise. they are one of the best SMT shops in the world. You walk across the balconey and look at all their SMT lines and you see a handful of people running the whole place with automation moving all the mat'ls. they do their own SMT and if you have to buy SMT bds. then the jabils and the selectrons are charging premiums becuase of the short capacity. It will be rough...BUT GTW WILL SURVIVE AND COME OUT OF IT. The lower teir will be slaughtered. and that includes the Japanese.