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: AlanH who wrote (44600)	5/23/1998 7:30:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Alan, I think perhaps you misunderstand what I mean by pre-defined. Lets move to a more neutral tool than computers. Let's say we are talking about trucks. If you ask the user of a van what his requirements are, and he tells such things as net cargo space, size of the vehicle, number of seats etc. Let's say that you identify several candidate vehicles, and from that list select one as the lowest cost solution. But now the potential purchaser points to the fact that another vehicle has air conditioning, and this is an advantage over the vehicle you selected. What I am saying is that this behavior is common, and is designed to thwart rational analysis and substitute subjective considerations after the fact. If air conditioning is important it should have been listed as a requirement to begin with. The process is, or ought to be identical with an IT manager. It can't take the form of "let me see the answer and then I'll restate the problem so we can get an answer I like." People do that all the time in order to justify buying a Dodge over a Chevy (or vice verse). TTFN, CTC

To: AlanH who wrote (44600)	5/24/1998 10:38:00 AM
From: rudedog	Respond to of 176387

As utility decreases with each evolution, IT managers will become increasingly concerned about which points on the continuum are sensible. Alan, that's exactly the point. The utility value decays a lot faster than the book value, and assets are replaced throughout the technology cycle since the usage curve is not flat. A system purchased today for $2600 vs $1300 will carry that 2X book value throughout its life. The IT manager has a hard job to justify that purchase unless he can quantify the countervailing benefit. The savvy IT manager knows the value tradeoffs at each point at which he must inject assets, and picks the corresponding technology. The problem with the specific case advanced by Meathead is that the TCO is NOT lower for the more advanced systems in this scenario. What we see happening is that a small fraction of leading edge systems enter the front of the curve at a premium price. 6 to 10 months later the identical systems are purchased but at a much lower cost since they are now 'older technology'. The benefits to having similar systems at each point in the curve far outweigh any productivity increase on the front end of the curve. So we see a requirement for the latest hot box in small volume at the front of the curve, a trend to slightly more mature technology at the knee leading to volume commitment (i.e. systems that have been in the market long enough to have just lost the 'new' premium) and even purchase of obsolete or used equipment at the back end of the curve if late cycle injection is required. Since the book value of current equipment at each point in the curve is known, it is straightforward to calculate what the price for systems to be injected ought to be. There is also a lot of work currently going on to extend the back end of the curve so that assets with significant book value but little utility can be managed. One method is to extend the life of those systems by turning them into 'lite' PCs or 'windows terminals'. Another is to trade in the assets through one or another mechanism. Dell has a program to recycle systems at the back end of the curve but Compaq (through Compaq Capital) has a much more aggressive program for asset management which takes systems from all vendors (including non-intel systems like Sun and HP workstations) and provides better than fair market value trade-in against new system purchases, which cancels the book value problem by offering a rebate which more closely matches book value.