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

To: Fangorn who wrote (32897)	3/7/1998 10:41:00 AM
From: XoFruitCake	Read Replies (2) \| Respond to of 176387

Has anyone consider the possibility that we have an industry over-capacity problem? I think it is pretty clear that the growth rate of industry PC revenue is slowing down for the last few years. (The unit volume goes up like crazy but the dollar revenue is the one that count). CPQ inventory problem may be caused by their management mistake or caused by the possibility that the world has too much capacity to product PC Vs the demand for PC. If this is the case, Dell will be affected quite badly as well. Someone posted before how the disk drive industry went through this problem last year and it is very similar here. The price point for newest and fastest PC used to be $3000 to $3500. But lately the newest 333MHZ PC are advertised for $2000+. It seems that supply and demand meet at much lower price point than before and it indicates that either supply is far more than before or demand is much less than before. Since the unit volume grows like crazy for PC, it must be the supply (industry's capability of producing much more PC) is catching up. The problem with Dell is that not only it has to be profitable, but the profit has to grow 50+% a year to justify the stock price. Given what CPQ said on Friday that they are going to slash price on PC, does anyone believed that Dell's profit will grow in 50+% annual rate this quarter? If CPQ drop the price of their PC by 20%, and Dell match the price cut, their margin will get squeeze. If they don't match the price cut their unit volume will drop. I know quarter by quarter comparison is silly but if it is an industry wise overcapacity, the same kind of price drop will happen quarter after quarter until some manufacturer loss enough money and go bankrupt (or close factory) or demand really pick up. I really see a few very ugly quarter going forward for all PC companies including Dell. Any thoughts? mw because price is so low.