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

To: Jason W. France who wrote (34603)	3/16/1998 9:27:00 PM
From: jbn3	Read Replies (1) \| Respond to of 176387

Jason, I missed one. Just came across it.... techstocks.com o) dell is running out of steam and soon will be heading downward. This thread does have its share of cheerleaders, (when you have a winning team, it's hard not to shout it!) but most of us do welcome serious discourse. It is just truly hard to find logical, cogent, compelling reasons to be bearish on DELL. We had a poster come on about two weeks ago, who told us what garbage DELL machines were. He started out telling us he owned four, which he implied had been purchased over a period of time, then it was five purchased all at once, but they all had problems, and DELL wouldn't fix them. The whole thing was ephemeral, when he was called to produce factual data, he disappeared. Anyhow, you seem to do an excellent job of raising the temperature on other threads. Why don't you stick around and argue the negatives? Regards, 3

To: Jason W. France who wrote (34603)	3/17/1998 12:02:00 AM
From: XoFruitCake	Read Replies (1) \| Respond to of 176387

Jason, let me give it a try in laying out a bear case for all PC makers. Sorry for the long post. In the last few years, the unit growth of PC in US has been slowing down from 25+% a couple years ago, to a projected 10-15% in 1998. I assert that we are at a phase where we are building the supply much faster than the growth of PC demand. Supply includes all the factories that Dell, CPQ, IBM, and the white boxes makers built. Every computer manufacturers base their business plans on the premise that they have to grow to survive (the more PC they sell, the lower their manufacture and sales cost). They are building factories as if they will win market share. Guess what? Someone has to lose market shares to others. The capacity of the losing companies become excess. It creates inventory problems for these companies. I think we have already seen reports that CPQ, HWP, and IBM all have too much inventory in the channels. The next phase is the price cut or price war to clear the inventory. However, inventory is the symptons, the real problem is the excess capacity. The price of PC will spiral down until someone lose enough money, decide to close factories, and get out from the business. When supply and demand are back in balance, then the price will stablelise and the remaining companies will grow again. I think Toshiba already announced that they will get out of the PC market; CPQ and HWP have already announced that they are cutting the servers price drastically (up to 20% in HWP cases and in the case of CPQ, they throw in the monitor, memory etc.). MUEI announced today that they lost a bundle last quarter. If you believe as I do about the scenario, then you have to ask whether Dell can prosper in this environment. I think we believed that Dell best grow areas are in Server and Notebook. Look at the server price cut and the price drop in Notebook. What is the margin going to be like in these 2 areas for Dell? Someone indicated in the DEll Bear thread that in NY metro area, CPQ advertise a 300MHZ, 8GB, 32M SDRAM, DVD systems with monitor for $1700 or so (I believe it is Brian's post. Please check it for accuracy). Can Dell make money with this kind of pricing? and What will the margin look like? In MUEI announcement today, they said that the price of notebook actually dropped below their production cost. Assuming that Dell is more efficiency than any manufacturers and they are capable to make money with this kind of pricing. What is the unit growth that Dell has to do this quarter in order for their bottom line to grow the 30-50% YTY to justify their current price. Do they have enough factories and trained technicians to build all these machines even if they have the orders? Factories and trained people take time to build and hire. What about the factories that other PC makers built? By default, if the industry is only growing 10-15% this year, but Dell growth 30-50%, then there is going to be a lot of other PC makers' factories producing PC that no one buy. Would this drive the price even lower to the point that may be even Dell loss money on every single machine made. I know this is a doomsday scenario. But guess what? This cycle played out in DRAM market a couple years ago and they played out in the disk drive market last year. The worst part is that everyone remain in this business now has a very deep pocket and see PC as a vital part of their respective company. That means they will lose a lot more before they will decide that it is time to get out of the PC business. Dell registered to borrow $500M and everyone is guessing what they are going to use this money for since they already have over $1B in their balance sheet and generating cash flow like crazy. In this doomsday scenario, they may need this money to grow since they may loss money for a period of time. For the record, I have puts on both CPQ and Dell. I hope to hear from everyone else whether this is a likely scenario. (If I am wrong, I would like to have a chance to reverse my course when I am still ahead :->>). mw