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

To: kemble s. matter who wrote (26561)	12/30/1997 9:35:00 PM
From: Meathead	Read Replies (1) \| Respond to of 176387

The biggest danger is not in margin squeeze but slower revenue growth. This potential revenue growth slowdown however will likely be offset by increasing volumes. Sell 1000 systems at $1100 rev = 1,100,000 Sell 1200 systems at $950 rev = 1,140,000 If the processor drops by $150 and you drop system price by $150, guess what... margins go up! Example: COGS = 750 ASP = 1000 GM = 25% COGS = 600 ASP = 850 GM = 30% Aint it beautiful? All PC makers have the opportunity to drop prices and increase volumes at any given time due to the fact that no-one has a dominating market share position Compaq is the closest with 14%. The problem is that if component costs don't decrease, margins get hit. In this scenario however, the big computer companies (especially Dell with their business model) will be able to pass these savings along quicker than many tier2 and tier3 companies who will continue to loose market share. That's how Dell's volumes will increase. MEATHEAD