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

To: Meathead who wrote (36701)	4/6/1998 12:38:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Meathead, part of the differential in margins has to do with what the company manufactures. If you make your own cases, power supplies and wiring you may show higher gross margins, but your inventory levels must be higher, and you create additional levels of complexity and opportunities for added expenses which are frequently not included as COGS. One of the things that Dell critics have a big problem understanding is that as important as margins are, inventory turns are even more important in the tech sector. Suppose you have a 30% margin and turn your inventory 6 times per year. With all other things being equal you can achieve the same gross profit with a 7.5% margin with 24 inventory turns per year. Well Dell turns its inventory more than 52 times a year, and Compaq ... ? Regards, Paul

To: Meathead who wrote (36701)	4/6/1998 1:03:00 PM
From: Eddie Kim	Read Replies (2) \| Respond to of 176387

Some good points; however: Compaq has also emerged stronger after every-single-price war. Also, factor in that Compaq was large enough to be effected by the pc war unlike Dell which has only emerged as a force in this decade if not the past five years. No, don't throw out gross margins, and Compaq's consistency does not stink. How can anyone say this? Compaq has shown over the past two decades that it has consistently risen to the top of the industry - overcoming all obstacles. Using your methods, we should also throw out Dell's previous quarters. I hope when Dell does have one bad quarter (which it will some day) you don't start to say Dell lacks consistency. Dell does not make more money per machine than Compaq. What facts do you have to base your claim? I'm basing my statement on that Compaq had a GM of 27.5% while Dell's was roughly 25%. Granted Compaq sells far more high-end equipment than Dell. Finally about the article, I think M. Dell is wrong to think that large to medium companies rather rely on several companies than on just one. The headaches, hassles, and confusion that results from dealing with multiple firms can be alleviated by dealing with just one. Furthermore, computing these days is getting more and more difficult and complex. Companies such as IBM and HWP can sell the whole package. They sell you the servers (mainframes), pc's, networks, software, and the people. Think of how convenient this is to a large firm. Now Compaq hopes to do the same. Whose strategy will ultimately win: IBM, HWP, and Compaq...or Dell. As for this quarter, I think it is only a short term blip on the screen. Normal growing pains for an aggressive, expanding company in an competitive market. Needless to say, I think Dell is a very sold company that should make any holder some good cash. However, I think in 5 to ten years Dell might just be facing the same problems Compaq is now, if not sooner. Just normal growing pains.... Here's an interesting article: exchange2000.com -Eddie