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

To: jim kelley who wrote (46958)	6/11/1998 9:01:00 AM
From: Bilow	Read Replies (2) \| Respond to of 176387

Hi jim kelley; Regarding what happened in the supercomputer market... First of all, for anybody who thought the supercomputer market has always been healthy, here are some links: "The market started declining seven or eight years ago," said Robert Ewald, executive vice president of SGI (Mountain View, Calif.). techweb.com cutthroat supercomputer market techweb.com Regardless, it's going to be a great time for the supercomputing field, which has been moribund for most of the last decade. techweb.com Things may be looking up for it now, but when the last integration wave hit the industry it was not pretty. Sure you can blame what happened to supercomputers on errors by the companies involved. But that's whistling in the graveyard. The fact is that the supercomputer industry got converted from fast processors to massively parallel processors. And IBM's machines are great examples of that. Integration means that a processor on a chip is faster, even though it is using technology that may not be as fast as the fastest available. (I.e. GaAs versus Si) This is great for the customer - prices drop like mad. But it is lousy for the companies. The response of the supercomputer companies was the usual suicide response. Stuck to the machines they knew, as the profit margins on the newer, more highly integrated machines were known to be lousy. And they lost market share big time. Sounds like Dell avoiding the sub $1000 market. Companies that fail to get onto the cheap personal computer band wagon are repeating that same mistake. On the other hand, making the transition is to admit that market prices are collapsing. Nobody wans to admit that, and humans believe pretty much what they want to. It is my belief that the cheap market will be the one that dominates, and I have earlier shown just how cheap that market can go. I agree that: The cost of a given level of performance has dropped byÿ about 50% per year for the last thirty five years. But this is the average performance improvement. Everybody's business models assume this level of improvement, and everybody's computer companies are adapted to it. But we are not facing an improvement in bang/buck of only 50% per year over the next few years. Instead we are about to see an integration wave run through desk top PCs. Integration waves cause sudden bang/buck improvements of 5 or more times. They are great news for costumers, but lousy news for suppliers and retailers. Its sort of like having an auto dealership when suddenly everybody wants to drive motor scooters. It was the sudden drop in supercomputer prices (relative to a modest increase in supercomputer sales) that destroyed the supercomputer industry nearly a decade ago. The same thing is presently happening to the mobile computer industry (seen the latest prices on the ThinkPad? That transition isn't done yet, give it another year.) The system on a chip wave already went through embedded systems. It is obvious that desk top machines are next. Every PC maker is working as hard as they can on cheaper processors. Cheaper in the sense of being a little behind the curve on performance, but with integration that reduces the cost of a personal computer by huge margins. Those chips are going to be out in a couple years, and prices are going to drop drastically then. I'll continue to post links to articles on systems on a chip. But recognize that the changes I see are going to be slow. My guess is that Dell's stock price will set new highs between now and the end of summer. But over the long run, I don't see them adapting to the ultra-cheap computer market. Dell has made mistakes in the past. The cult of personality that holds that a single guy makes a big difference in a huge company is a little strange to me. I've had my share of jobs in big companies and my observation is that management generally doesn't know what is going on. On the other hand, an exception to that would be nice... But everybody has to follow their own advice on stocks. And humans have an essentially infinite ability to believe what they want to believe. -- Carl