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

To: Chuzzlewit who wrote (35144)	3/21/1998 6:15:00 PM
From: Jim Patterson	Read Replies (2) \| Respond to of 176387

re: <<Now, given your mindset, it would seem to me that the most logical shorts would be the companies most likely to suffer if your scenario comes to pass. The logical candidates would be the ones with the greatest amount of old inventory. Since Dell doesn't have this problem your preoccupation with Dell is puzzling.>> Thanks for the Accounting 101 lesson. Paul, I am not short DELL the company. I am short DELL the stock. Ultimately the Companies performance is reflected in the stock. Right now, I think investors maniacal hype is reflected in the stock price. As the conditions I am about to discuss become more prevalent, I anticipate investor hype to fade. That should (notice how I did not say will definitely, this is why it is a horse race) bring the stock price down. Where the stock goes in the short run IMO has little to do with Much of what is discussed on this thread. So CPQ does not make as many $$ per machine or their margins are this or DELL has no inventory. CPQ is twice the size of DELL. DELL's model rules, Margins could do this or that. HWP does this; IBM is out of it. Historically, when the industry giants (CPQ & IBM in this case) start to have problems, (the source of the problems are rarely important) All companies in the group soon develop problems of one kind or another also. It is sometimes called industry weakness. CPQ's problem is not a "One time event" that can be written off as company specific. How do we know? 1) IBM has the same problem. 2) CPQ despite the fact they say the problem will be cured by the end of the second Q, are having large buy-ins, at the end of Q1. This is what got them into their situation in the first place. I extrapolate that to mean the problem will not be cured as fast as they want. So, CPQ management is no good. I have a hard time believing this. Therefore, there is a real problem. INTC's price cuts in the last weeks of this and last Q is endorsements of the CPQ problem. Bottom line here is that the PC business is not growing as fast. There is an inventory glut. Why? Capacity is growing faster than demand. That DELL has no inventory is not important. DELL is growing capacity just like CPQ. None of the big companies are going to back off from the market share war CPQ is now using price as a weapon. IBM is too. That is a lot of competition from two companies that have tremendous cash resources. Lots of cash means they can fight with the price weapon for a long time. The share is first won from the smallest financially weakest companies. That part is over. Now the biggest can no longer grow units as fast as they can take share and their existing markets can grow. Hence inventory build. Now that they can no longer make profits over all, they must continue to grow units and share faster. That should take them back to profitability. But big egos are involved. Market share at any cost hurts everyone. At that point, who can take the beating the longest will survive? Basically I am short CPQ because they won't make any money for q1, q2, IMO, Q3 and maybe even Q4 IMO. I am short DELL because I think CPQ's 6.4 Billion in cash will last longer than DELL's 100 million in cash and 1.2 billion in marketable securities. Call it 6.4 against 1.3. Who runs out first? Now DELL is still making money, so that helps, But PC's are IMO a commodity. Ultimately price will win out. (This is my opinion don't respond to this part, I know y'all disagree) Now add that to what I have said about the current environment, IMO, The true commodity nature of the PC business will show itself more readily. As this happens, 6.4 against 1.3. Oh yea, IBM has about 6 billion cash too. Jim

To: Chuzzlewit who wrote (35144)	3/30/1998 12:09:00 PM
From: Jim Patterson	Read Replies (3) \| Respond to of 176387

DELL and Wang enter into service agreement. Looks like DELL is starting to think about Services in the PC buis. Wonder what is making them do this ? Could it be the increased service needed with more complex PC's and networks ? Could this be the start of an acceleration of DELL's attempt to build a large service organizational structure ? While a long term positive in my mind, would it impact the PE short term ? Would it constitute a deviation from the successful model that has made DELL the envy of every other hardware company in the world ? So many questions to answer ..Oh... Bother.... Jim