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

To: Jim Patterson who wrote (35090)	3/20/1998 4:36:00 PM
From: David Harker	Read Replies (2) \| Respond to of 176387

More to Jim P.: Jim wrote: "Here is my point again. To say: Dell makes $500 on a $2500 PC, 20% margin. Price cut from INTC of $200 that makes $2500 - $200( from INTC)= $2300 DELL still makes $500 on $2300 PC and Margins Go up to 21.7% I am saying that this is incorrect." Well, the math sure looks correct to me. If Dell choose to preserve "$ per unit" profit, yes, their margins would rise. You have studied Dell's margins, and lately they have been holding constant. That would imply that in the above example, Dell now makes less $ per unit, but chooses to preserve the 20% margin. That is their choice, either way. Big deal. If they drop "$ per unit" (ie, keep margins at 20%) then they have a more competitive product, and gain market share. They also put the hurt on their competition, who can't take advantage of the price drop nearly as quickly as Dell can, due to the competition's much-inferior inventory management. If I had the url, I'd post it, but I read recently in a write-up on Dell, or in an interview w/ M. Dell, that Dell's internal cost to build a given PC is 9% less than their competition, for the reasons stated above. This low-cost model is an inherent advantage, and a UNIQUE advantage. Since component prices in this industry ALWAYS trend lower, Dell will ALWAYS have this advantage. Even if competition manages to completely stop doing "business as usual" and completely emulates Dell's current model - which would take YEARS - if it is even possible (Dell started this way from day one, a huge advantage - it's really hard to rebuild a car engine while you are driving it down the road.. which CPQ must do...) ..by that time dell will have improved things even more - take a look at inventory levels at Dell, and how they drop each quarter, down to only 7 days of inventory. Unless Dell screws up, they have the next several years in the PC industry to clean house - they have a huge advantage that the competition is unlikely to even catch up to, let alone surpass.

To: Jim Patterson who wrote (35090)	3/20/1998 4:39:00 PM
From: SecularBull	Respond to of 176387

Jim, I don't agree with you. I think that DELL has the pricing power to make 21.7% (using your number) if they want to, but they choose to keep it at 20% to gain market share. 20% of 10,000,000,000 is still more than 20% of 9,000,000,000! >>Here is my point again. To say: Dell makes $500 on a $2500 PC, 20% margin. Price cut from INTC of $200 that makes $2500 - $200( from INTC)= $2300 DELL still makes $500 on $2300 PC and Margins Go up to 21.7% I am saying that this is incorrect.<<

To: Jim Patterson who wrote (35090)	3/21/1998 3:26:00 PM
From: ratan lal	Respond to of 176387

Jim DELL still makes $500 on $2300 PC and Margins Go up to 21.7% I am saying that this is incorrect. That is correct. But wheteher DELL makes a higher or lower profit depends on the "SALES". If Sales remain the "SAME", then DELL in fact has made more money at 21.7% margin than it made at 20% margin. IF DELL's profit $$s remain the same, the obviously its sales have dropped in the same ratio (21.7/20)as its profit margin. Furthermore the idea behind lowering prices is that DELL will sell even more than before. If they do, then not only has DELL made a higher 'MARGIN' but they have also increased profit $$s. ratan