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

To: Joseph Francis Torti who wrote (46471)	6/5/1998 9:16:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Joseph, I think you're missing a few bits of information in your analysis. The reason prices have been dropping is because of competitive pressures from companies like CPQ, IBM and HWP. These outfits allowed inventories to get out of hand, and then CPQ tried to dump them by dropping prices. The bottom line is that when all is said and done Dell showed that it had the highest gross margins of the bunch in a very tight pricing environment. It was able to accomplish this through superb inventory management. In fact, these other companies got into trouble because when they tried to emulate Dell they couldn't seem to get it right. JIT manufacturing is tricky, and CPQ screwed up big time. The point I'm trying to make is that if this environment continues it works for Dell at the expense of CPQ, HWP and IBM. How long will these companies stay in the business if they can't generate earnings? Clearly, the lesson to be learned from this quarter is that to generate earnings they need to do two things: first, they need to get their inventories under control, second, they need to stop predatory pricing. But if they raise prices Dell's earnings will accelerate beyond current forecasts. Finally, when you look at Dell's P/E ratio in comparison to its projected year ahead growth you find that it has the lowest YPEG of the bunch. TTFN, CTC