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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: James Choi who wrote (22540)	11/22/1997 11:51:00 PM
From: Ted Jackson	Read Replies (1) \| Respond to of 176387

James, I recently read on Yahoo! that manufacturers can't figure out why steel is declining so rapidly in price. They see a lot of demand, so why the bargains? My hypothesis was that SE Asian countries are exporting more. What do you think? Is steel actually profitably exported (all the way over here to the US)? Should we also short US steel companies? Ted

To: James Choi who wrote (22540)	11/25/1997 2:08:00 PM
From: Geoff Nunn	Read Replies (3) \| Respond to of 176387

James, I see a problem in the following argument: Korea will try to export its way out of the trouble. It is already selling steel at 50% discount in the southeast asia. Who knows when SamSung laptop will cost so low that people will forgo Dell for half priced Samsung. To make the matter worse, Japan competes directly with Korea in many areas. Japan might have to devalue its currency to keep up the competition. (Neithre country can survive a month without exporting.) If so, expect to see dirt cheap NEC and Hitachi and Sony computers. In no time the discount will eat into Dell's profit margin and Dell might follow the fate of Gateway before we know it. If Samsung wants to sell computers below cost, it would be Samsung that would be hurt not Dell. Samsung would in effect be subsidizing some lucky buyers, but it doesn't follow that Dell must offer the same subsidy. The price Dell is able to charge is determined by overall supply and demand which would be unaffected by Samsung's actions. Samsung can give their computers away and it would still make no difference. What would hurt Dell would be events that would increase global supply. Dell would be hurt if, for example, Samsung et al were to expand production. But there's no reason to think that will happen and in fact, under your scenario, supply should fall assuming that Asian producers who lose money eventually exit the business. This is a reasonable expectation since even the Japanese producers do not have unlimited pocketbooks. If Asian firms are forced into bankruptcy because of their subsidy practices, there will long term be a reduction in supply. If you really believe your scenario then, you should be bullish on Dell not bearish! Regards, Geoff