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

To: Jim Patterson who wrote (35169)	3/21/1998 7:31:00 PM
From: XoFruitCake	Respond to of 176387

Jim, I have the same assessment about the supply and demand situation for the PC industry. However, I would like to add a couple points. Once the supply exceed demand, the players (IBM, Dell, CPQ etc.) cannot simply make less PC. It involves more than ego. The fixed cost (equipment depreciation, factory space, salary for technician, service rep. etc.) of the idle asset will eat into the balance sheet. In addition, the component cost are determined by the market share (how much machine each PC makers build). By slowing down production and lose market share voluntary, the PC maker will effectively accept higher future component cost and they will become even less competitive in the future. So it is a situation that the PC maker has to fight for the market share even if they are losing money in the process or accept the faith that they will eventually go out of business. I think we can find out the supply/demand picture in the next couple weeks. The proof is going to be the price of 333Mhz Pentium machine from the major players. If the price drop exceeds the price cut from Intel, I think we can safely say that the supply is definitely exceed demand (at least in the high end). If the price drop is less than the price cut from Intel, then the supply is less than demand. mw

To: Jim Patterson who wrote (35169)	3/22/1998 5:30:00 AM
From: Dan B.	Respond to of 176387

You are short the Co. and not the stock? Doesn't seem to be a useful distinction, to me. <<...when industry giants start to have problems...(the source of the problems are rarely important)all Co's in the group soon develop problems of one kind or another also. It is sometimes called industry weakness.>> I'd say the source of the problem is always important, in fact it is key. I wouldn't expect much success in investing to arise from discounting the source of a problem in a Company. No one, in any event, should want to do that, unless it makes sense after you know what that problem is. In 1996 computers sold more units than a mature Television market for the first time in history. The computer market is young. I won't worry about the unexplained problem you imagine soon. <<<CPQ'a problem is not a one time event that can be written off as company specific. How do we know? (1.) I.B.M. has the same problem...>>> The foregoing breaks the rules of logic. If industry weakness were the problem(logically possible, not a must), I doubt Dell would blow away estimates simultaneously. Even if both these Co's have the same problem, it doesn't follow that it can't be a one time event for each. <<<Intc price cuts...endorse...CPQ problem...that industry is not growing as fast>>> Intel price cuts ensure that the industry will grow again- as is historically the result. <<<there is an inventory glut. Why?>>> Not over at Dell. Why? Consumers are waiting on a price cut, I.E. a 2000mhz chip with a fast bus and a gig of ram running(with surprising bandwidth) a choice of a million T.V.-like internet channels on demand,for say, $500. Folks are reluctant to buy the current low end machines for $8oo. They won't be so reluctant when $800 buys the above system. Price cuts will lead the way. So I ask, what will happen to demand each step of the way between here and there(rhetorical)? People replace T.V's for far less added utility. Even if the P.C. business continues to grow more slowly along the way, still, grow it will, and that'll add up. The "conditions" you discuss will not add up to a situation in which the company that can <<take the beating the longest will survive>>. Instead, the company that AVOIDS beatings might lead the way and survive. Dell IS making money and that WILL help. Prices will fall and I think you are right that prices will win out. When the computer I described becomes a reality, I suspect Dell will be selling lots of units. If, however, as you say(I paraphrase here, forgive me), the strong companies are done taking share from the weak Co.'s, and they can no longer take units as fast as they can take share and (make)their existing markets grow; and they can no longer be profitable overall; hence they build inventory; hence they grow units and share faster- thus taking them back to profitability- at all costs- which hurts everyone- thanks to big egos; then how many decades can Apple Computer survive at a yearly cash burn rate equal to their average of the last 5 years given the cash they have on hand now? In all seriousness, Apple just might win yet, eh? It IS logically possible if they develop some unimagined leap in tech. someday. I wish you luck and hope this post was food for thought. I just don't believe in the semi deathspiral scenario you seem to envision. I really think you should re-think things. If you say nothing else about this post, may you tell me, are you a Libertarian, Republican, or a Democrat. Just curious.