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To: Chuzzlewit who wrote (37683)	4/13/1998 6:20:00 PM
From: Eddie Kim	Read Replies (2) \| Respond to of 176387

>>Eddie, I believe that Compaq has two distinct problems. The first is one is in the high end market as you say. There, they have bloated inventories of obsolete components and machines. Hopefully this is only a short term problem. There aren't any real indication to say that it is not. >>But I believe they have a second problem related to the retail marketplace. Jim Kelley and Meathead have repeatedly documented the razor thin margins that existed on the sub $1,000 machines prior to taking into account the dual profits that the channel must achieve (profit to the distributor and profit to the retailer). The only thing I can say about this is that I trust Compaq management. There can be no doubt that margins are lower relative to high-end machines. Yet remember Compaq was the first company to mass produce these sub-$1000 machines and they said they would do it only if it was profitable. Compaq management continues to say that they make money on these machines unlike several other pc companies. I wish I knew what the margins where for these machines and if Compaq was cannabilizing some of its more expensive sales and not just from their competitors. I just don't know. All I do know is that Compaq had 27.5% revenue margins last year. And that's pretty high. -Eddie

To: Chuzzlewit who wrote (37683)	4/14/1998 12:13:00 AM
From: ed	Read Replies (1) \| Respond to of 176387

You are completely wrong !! The sub$1000 still have lot of profit margin, The average cost of the sub $1000 is under $500. In Taiwan , Some of those Desktop is sold for $700 on retail. Just do your calculation, you will know what the cost. Case : $50 Power supply : $30 $ 16 M DRAM, $5 Chipset by Via (2 sets) : $15 CPU (AMD) : $100 Diskdrive : $60 Modem : $70 Labor : $7 ( You can assemble one PC in one hour) Graphic chip : $9 Cables : $20 CD Driver (16 X ) : $50 Other cost which I nissed here : $100 Pls add up by yourself and tell me what you got !!!!!!

To: Chuzzlewit who wrote (37683)	4/14/1998 11:39:00 AM
From: rudedog	Respond to of 176387

Adding my 2 cents - in the consumer line (presario) margins are going UP according to several CPQ people I have talked to, they anticipate that trend to continue (improve margins as cost goes down). These products are also hard to get, cpq can't make enough. Sub 1K commercial machines are a different story at the moment but next round of products is expected to put margins back in line. CPQ should be well positioned to dominate and make money in this market.