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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Tom Markowski who wrote (7920)	12/6/1997 5:16:00 PM
From: Sid Turtlman	Read Replies (1) \| Respond to of 9285

Tom: "Your P75 is only two years old. In three years you will replace it because: ...[four good reasons]... The bottom line is you will replace the unit." True, and it will probably be before three years from now. But the question for the box makers is what their margins will be three years from now. If you look at the history of every consumer gadget (TV's strike me as most comparable) profit margins of the manufacturers peak out and start to decline well before the product achieves saturation. TV stocks (Motorola, RCA, Admiral, Zenith, and a tube maker, National Video - the Intel of its day) peaked out in 1965, 10 years or more before the peak in demand for that product in units or dollars sold. There is a life cycle for products. Initially, they are somewhat profitable for the manufacturers, but a lot of money has to be spent convincing the public that they need one. Then there is a phase where the product takes off, demand exceeds supply, and margins are huge throughout the entire product system, from the guys who make it to the guys who sell it. Then at some point the capacity to make and deliver the product catches up and exceeds demand. Demand might continue to rise, and usually does, but the heyday of great margins is over. TV's now, despite huge unit sales, are marginally profitable for all concerned. Same with VCR's. Whether you make them or sell them, you can make some money, but not a lot, and any given year some players are in the red. Some of them hang on forever (e.g. Zenith) but the good margins are history. It is absolutely certain that the computer box business will turn out like that. The only question is when. A few years ago everyone was making plenty of money, and now it is down to a handful. Eventually computers will be as profitable to Compaq and Dell as TV's and VCR's are today to Zenith and RCA.