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

To: K. M. Strickler who wrote (32014)	3/4/1998 12:33:00 PM
From: Jim Patterson	Read Replies (1) \| Respond to of 176387

re: <<My question would be that since DELL's turn rate is so HIGH, and the manufacturers are LOWERING the prices of the components that DELL uses, DELL can move out the old equipment in a HURRY, even if they have to DROP the price a bit, they don't have weeks of inventory to move. >> Everyone thinks that this is the key to Dell's successful business model. I am not going to argue that it is not one of the main ingredients for their success, as we all know, It is. From a fundamental standpoint, I ask the question, what is needed for this to continue? Unit growth, Revenue growth and Stable end market prices. What are the enemies of this concept? Falling end prices, Slowing demand, and competitors that make mistakes and sell product at cost to clear inventory. DELL admitted that server and workstation APSs were under sever pressure in their January quarter, that is what caused the flat ASPs. It is also the reason DELL had a 50-point margin drop in the quarter. Because of the run in the Stock, DELL the company is in a 'don't screw up' mode. If dell has a bad quarter, the class action could be brutal especially given Michael's bullish comments on CNBC. Well what can screw them up? Falling ASPs. We know about the price pressures across the board. Many say that it is just passing component price reduction along to the customer. The biggest problem with this is that you cannot make as much $$ on a $2,000 machine as a $2,500 machine. CPQ has apparently already screw up, that is why they are buying DEC (I am sure there are many other reasons), but CPQ can take a charge to earnings to clean the slate. This is not what DELL does. DELL just grows. Well if ASPs drop, units have to grow even faster maintain revenue growth. Even if they maintain Revenue growth, Margins suffer. A small sign of this happened in the 4th Q. Last, DELL will not have a ramp in the affordable PC market; Dell is avoiding it like the plague. This is where the don't screw up mentality will cost them in the long run I don't know if it is happening to a greater degree now or not. That is one reason I am here. Jim