Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Sabrejet who wrote (50051)	3/13/1998 11:51:00 PM
From: John Carson	Read Replies (2) \| Respond to of 186894

Seczebra, I just read your post to me (50052), which was in response to my previous post (49976), so I will try to respond. First of all, I did not say that "Dell will bleed to death." Did you put that in quotes meaning you are quoting me directly? If CPQ has all those computers in the channel and they have to sell them, they will have to cut prices drastically and in a hurry if they are to beat the new cycle of technology to arrive this summer. It is estimated that this inventory is equal to one year of DELL sales. Now if CPQ drops prices by that much, why would anyone buy a DELL box. Mr. Dell will have to drop his prices too and by at least as much. What do you think happens to his profit margin? It goes from 8% to 0% for a couple of quarters. Now all the other boxmakers also have to cut prices to keep up so it can only get worse after that. This will not "vaporize Dell," it will only slow them up a little, perhaps two or three quarters, just like SEG, WDC and QNTM. Enough to cut their stock price in half, thats all. Dell will go back to CPQ just like QNTM went back to SEG. I did not mean to imply that all products made and sold are commodities. Computers and computer parts do seem to be commodities these days though. Does it really matter if an Intel chip is in a DELL, CPQ or GTW box? Cars made by different companies are not commodities since they are unique, they do not have the same engine or drive train. I did not say prices of components, e.g., disk drive, will drop. I said what happened to that industry may happen to the boxmaker industry. Of course if component prices drop, that would be good for DELL and CPQ, it could only increase their margins. Margins will collapse for DELL because they will have to cut prices on their boxes. The fact that Dell does not have a channel is irrelevant. If CPQ is selling a computer for $800 and Dell sells the same one for $1500, which one would you buy? If you go back and read some QNTM posts from last year, you can see how QNTM bulls were adamant in saying the same thing you are saying now. This could never happen to us. We are QNTM. We are unique because half our business is in DLT. DLT has a 100% growth rate. DELL is not immune to a price war. They are a boxmaker, just like CPQ, probably even more so. John Carson