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

To: K. M. Strickler who wrote (34896)	3/19/1998 11:45:00 AM
From: David Harker	Read Replies (1) \| Respond to of 176387

K.M. Strickler, I think the point of the article was not to compare characteristics of the industries, but to compare financial characteristics shared by these two companies, primarily their very low cost of capital, and very high returns on their capital: "The similarities between Dell and GEICO, for one, are significant. Both operate in seemingly low-margin businesses. Both cut out the middleman and market directly to their customers. Both, therefore, gain a cost advantage over competitors. More important, both employ far less capital than their competitors to achieve the same results, meaning that additional inflows of capital into these businesses generates much higher earnings growth than their competitors. "

To: K. M. Strickler who wrote (34896)	3/19/1998 12:30:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

K.M., I agree with your points. That was one very sloppy analysis. I was in the insurance/reinsurance business, and they do use OPM, because premiums are pre-payments. I suppose that the closest thing here is that if you look at payables expressed in days of COGS you will find that it is greater than A/R expressed as days of sales. The major point that distinguishes Dell is that it is an extremely efficient manufacturer which allows the company to generate large profits based on rapid turnover and low margins --more like a supermarket than a typical hi-tech manufacturer. That's what gives rise to capital efficiency, and that's what gives Dell the best return on assets of any business I've ever seen! There is another telling point (my apologies in advance to jbn3 on this one!). In the Harvard Business Review Article Michael Dell pointed out that he consciously avoided the trap of designing components, or, as he put it, if there is a twenty-horse race why should you be the twenty first horse. Isn't it easier to go with the winner? In choosing that route he avoids two pitfalls: (1) spending a lot of money needlessly; and (2) designing a component that is inferior to one already in the market place. Regards, Paul

To: K. M. Strickler who wrote (34896)	3/19/1998 12:58:00 PM
From: Fangorn	Read Replies (2) \| Respond to of 176387

Ken, Your description of Insurance is the common understanding but is wrong. The only bet the Insurance Company makes is that they set premiums high enough to cover the claims and have some left over. We all buy car insurance so that if we do have an accident we won't be financially ruined. We all pay a little so that the few that do have accidents don't have to pay a lot. Insurance Companies provide a product-Peace of mind, freedom from huge expense in case of accident- that the customer wants (find a need and fill it).