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

To: Techie who wrote (47487)	6/13/1998 10:26:00 PM
From: jim kelley	Read Replies (1) \| Respond to of 176387

Well it looks like MD should just give up. The fact that he is making increasing amounts money on his rapidly growing business and IBM, HWP and CPQ are not making a profit is simply an illusion. The end is nigh.......

To: Techie who wrote (47487)	6/13/1998 11:44:00 PM
From: Sig	Read Replies (1) \| Respond to of 176387

Techie I have read your posts and apparently you are concerned with a certain category of things/ predictions of prices, computer demand, competition, growth rates or lack of etc. Some of my opinions are as follows: 1. Dells most important product is people, for products first comes quality, then comes latest technology, then sales with a resulting ( and very good) growth rate. Growth by itself does not cut it, as witnessed by wdc, qntm, seg, and also all dram manufacturers,who went primarily for growth and overbuilt/overestimated what they could sell at what price. I consider those areas as wars in true commodity production as opposed to the skirmishes in some overlapping areas of computer production. IMO CPQ went directly for growth and is having problems. For competition in computer production, Ingram Micro is going to very effective by setting up 5 major assembly areas worldwide, one being a 6 mil sq ft facility in the South, another one being the new(6 month old) Tulip production facility in Holland. Their intention being to assemble computers to order for whoever wants them,( I believe one co. will be IBM) A huge threat to the white box manufacturers who still build perhaps 60 % of all computers, but not necessarily a threat to name brands and I would not be surprised to see companies like GTW, IBM, Cpq hire Ingram to assemble computers if their own factories are temporarily inadequate to fill timely orders. Dell has set a new precedent with 7 day or less delivery times, promises to deliver in 30 or 60 days will no longer be acceptable. Do you believe that Ingram is making their huge investments in the face of your (rather pessimistic) ggg predicted disasters in the PC market?? ( there may be some errors here as I go mostly by memory, comments are welcome) Sig

To: Techie who wrote (47487)	6/14/1998 1:13:00 AM
From: Chuzzlewit	Read Replies (5) \| Respond to of 176387

Techie, you raise too many issues for me to answer in one response, but let me start with a few of your issues anyway. C, if your fab last year produced 100MPUs and this year it's been only requested to produce 70, what does that mean about units shipped? What were you implying? What am I missing here? What you are missing is the total number of CPUs produced by all fabs as a percent of the previous period. Remember, companies like Compaq and IBM shifted away from Intel in favor of AMD and Cyrix for their lower end offerings. Thus, looking at Intel distorts what is happening. As for your reply to 3 on R&D, let me remind you that Dell isn't a Gorilla and that's FAR from being a strength. Although having proprietary technology means R&D expense, not owning it means barriers to entry are minute. Wrong! what you don't seem to appreciate is that barriers to entry take multiple forms, including but not restricted to proprietary technology. Thus, heavy capital outlays and manufacturing knowhow also provide prodigious barriers to entry. What was the barrier that prevented Compaq from emulating Dell's BTO model? ASP pressure started with AMD & Cyrix putting pressure on Intel. About 18 months ago Intel dismissed the pressure in their conference calls, 6 months ago the entire tone changed. You should know as well as anyone that Intel is always a leading indicator of what's about to come. Asian economic problems didn't help, but let me remind you that the Asians turned DRAMs into commodity WAAAAY before they had problems. So don't fool yourself into thinking the pressures would end when they get back on their feet. I discussed the Intel AMD Cyrix point earlier. I think your answer underscores the fact that you don't really appreciate the full nature of the Asian economic crisis. Much of it stemmed from the fact that Asian businesses were never profitable and they relied on currency arbitrage and central bank intervention to make money. In other words, they were dumping product because their central banks made it profitable to instead arbitrage local currency against dollars. The chips were simply used to justify loans from the banks. When the crisis finally subsides I think you'll find that Asian businesses will need to rely on cash flows generated from the business to survive, and that the cronyism we've seen in the past will be dead. Concerning value added: in a nutshell this amounts to meeting customer needs at a much lower price than can be had elsewhere. The way software is loaded onto machines for Kodak was a real eye-opener. Do read that HBR article, and maybe you should e-mail 3 concerning the contents. I think it will answer a lot of your value added questions. As for Dell's GMs, it was the mix and the fact that they passed on less of the savings from declining pricing. But the point to remember here is that they will need to get more & more competitive on pricing if they want to book sales, which goes back to my original point. If you want to see what I mean go to their site and check out their price on their Celeron based system. It's a total joke. They do that purposely because they want to push you to spend another 200-300 and buy the MUCH MORE powerful system. But regardless, the only thing that can save their butt is moving into the high end and it's dog eat dog there. This is simply an example of begging the question. You have assumed your conclusion! Based on the latest quarterly reports Dell produces and delivers machines far more cost-effectively than do its competitors. Clearly, it's the competition that will need to become more competitive, but they are caught because to lower prices will further erode their already narrowing gross margins. You cavalierly pooh poohed the fact that Dell's gross margins increased while every major competitor had major decreases in gross margin. How does this argue that Dell will need to be more competitive??? Well, I seem to be seeing the beginnings of writers cramp, so I'll end here. TTFN, CTC

To: Techie who wrote (47487)	6/14/1998 3:06:00 AM
From: Bilow	Read Replies (4) \| Respond to of 176387

Hi Techie; Will PC prices plummet further? And by some time next year, $399 price points may become a reality. cnn.com My guess is that most of the rest of the world will start buying personal computers when we get the prices down to the sub $300 range, but not until then. For reference, here is the recent posting by a PC market expert regarding how low personal computers can go, (quoted by Meathead): PC makers are madly trying to build sub-$500 PCs for these customers. I think this is folly. First of all, trying to squeeze another $200 out of today's bare-bones $699 PC is tough. The total semiconductor content of these systems costs about $100, so even if Moore's Law drives this down to zero, we're still a hundred dollars short. The rest of the system is motors and metal that aren't likely to get much cheaper in the near future. exchange2000.com If these people cannot even tell you what next year's computers will cost, there really isn't a reason for anyone to believe their estimates of what the industry will look like 20 years from now. The market for high end computers will come down in price before 3 to 5 years are out for the same reason that the low end market is diving now: Higher integration. Higher integration is not just a dry engineering concept. The usual financial analysts just don't have the engineering experience to understand the consequences. I've worked through integration revolutions in several industries now, and I know what happens. Each year computers get a little cheaper due to slightly higher integration. But every now and then, a revolution occurs. Entire systems can suddenly be put onto a single chip and prices drop suddenly and dramatically. Unit sales increase, but not by nearly enough to counteract the sudden decrease in ASPs. The revolution always destroys the companies that have grown used to the old high prices. These revolutions always start with the smallest, cheapest systems and then work higher up the chain. This revolution started with the mobile computers, now desktops, next year or two servers. There is no escape. Every company has to take its lumps, and those who try to avoid losses by concentrating on the higher ends get hit worst of all when the integration wave finally runs through that end. It is better to recognize what is going on, take your hits as early as you can, and try to maximize the bang/buck in the cheapest computer you can. With DELL trading at such historically high multiples of sales, earnings &c., now is an historic opportunity to make money on the short side. The next piece of news to watch for is the announcement of the design of sub $1000 server quality computers. We already have the announcement of sub $300 low end personal computers, the servers are probably not more than a year out. Naturally, the bulls are going to argue that M. Dell is a great genius who will solve all problems to the benefit of the shareholders, but M. Dell has made mistakes in the past, and will make them again in the future. With the personal computer industry about to light up in flames, there is no way that DELL will be left unburned. It just isn't possible. -- Carl

To: Techie who wrote (47487)	6/14/1998 12:58:00 PM
From: Geoff Nunn	Read Replies (3) \| Respond to of 176387

Techie, While I don't wish to pile on, it's the breezy, uninformed things you say such as the following that cause others here not to take you seriously: Tell me in 3 lines what's Dell's value added? If you have URLs I'll be happy to glance at them. Don't tell me it's their service. If Dell can hire Wang & Unisys to do service so can anyone! Dell designs, builds, markets, distributes and services PCs. The fact that other firms can also do these tasks is beside the point. Dell is not in business to undertake unique roles. It's goal is to make money (gasp!) To do that it must deliver products and services to customers which are valued more highly than the cost of providing them. The name of the game is efficiency, product reliability, cooperation for mutual benefit, both with suppliers as well as commercial end-users, cost cutting, etc. For many of its services Dell cannot and does not hire Wang or Unisys. If you had read the HBR article as others have recommended, you would have known that. As for ASP, the main reason it is declining is falling prices of components. This isn't a trend that started yesterday, it has been going on since the beginning of computers. Everyone expects it to continue, but so what? Why does this spell lower profits for Dell? If you believe there is a relationship between ASP and profitability, please explain what it is. If you have a model, let's see it. Let me remind you that ASP has declined dramatically throughout Dell's existence, yet profits have grown steadily. If you think this historical pattern is about to change, then explain why. Carl Bilow may be on the right track in suggesting that chip integration is a threat to Dell. In my opinion he hasn't made a convincing case, but time will tell. At least he understands what is required for Dell to stumble. Another potential threat to Dell is looming competition from firms like Ingram Micro. (See Sig's post). But neither of these arguments, properly framed, assumes declining ASP alone poses a threat. (If the demand for PCs is elastic, it is actually easier to construct the opposite argument that declining ASP will benefit Dell, IMO) BTW, if it's true that ASP drives profits why are supercomputer manufacturers struggling?