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

To: Techie who wrote (47514)	6/14/1998 12:40:00 PM
From: Lee	Read Replies (2) \| Respond to of 176387

Techie,..Re:<<a subjective, distorted view of the world.>> Maybe you'd like to change your statement They will dump as long as their variable cost is less than the price they can get for their product. since this shows some ignorance regarding Asian business practices. Maybe you haven't read or comprehended (if you did read), exactly how business is done in these countries. I believe CTC remarked about currency arbitrage being the primary business stimulus and this view is widely documented. Message 4808011 Since you can't seem to offer any current arguments to support your view, maybe you'd just like to go short and discuss your positions on the bear thread? Lee

To: Techie who wrote (47514)	6/14/1998 1:43:00 PM
From: jbn3	Read Replies (3) \| Respond to of 176387

Techie, For someone who purportedly handles OPM, your simplicity and glibness amaze me. Have you ever considered TV evangelism as a career? The indirect guys had to protect their existing biz. That's not because of the barrier to entry, but you couldn't figure that out. A newcomer won't have that issue to dwell with. Let's assume for the moment that your statement above is true (ah... assume you meant 'deal with' and not 'dwell with') and dwell on this in a bit more detail. Let Company 'X' be a 'newcomer' planning to enter the computer business to compete with DELL. 'X' has to a) have a plan for creating a competitive JIT / BTO company. A key word here is competitive. If 'x' can't build and sell their boxes at least as cheaply, 'x' is unlikely to sell much product. Competitive also implies similar reliability. DELL has it. DELL has the reputation. 'X' has to develop that from scratch. So they need to overcome that deficit by advantages elsewhere, such as selling more cheaply than DELL. b) decide on which segment(s) of the market 'X' wants to target. Does 'X' want to aim at low end, where they have to compete with CPQ, HWP, IBM, (and now ACER and others?), mid-range, high-end, or portables. Since your point is made in respect to competing with DELL, let us further assume that they are going to target DELL's market segments. DELL has > a 12-year head start in designing and building the machines and procedures. Some of this 'X' can undoubtedly use. Some is proprietary. Some is institutional knowledge c) develop plans for building facilities. 'X' can probably capitalize in large measure on DELL's example. However, some things are certainly proprietary. 'X' needs to do a patent search, and may even end up having to pay DELL royalties, which won't make 'x' a lot more competitive. d) develop a plan for hiring, training, and keeping personnel. Where does 'x' find the personnel. Perhaps in areas of large tech lay-offs. Who trains them? If they become trained and are good, they will command higher labor prices at the established companies. e) establish a marketing plan. You need a plan which is going to convince existing customers of DELL and the channel providers that you have a better product -- that their total costs in buying from you are going to be less than dealing with any of the others. And you have no historical record, no established reputation on which to base this. So you have to absolutely convince your potential customer that not only are you better, in 1 year, 2 years, and 5 years you will still be there to help him. Remember, the future of 'X's customer's company may well rest on his decision whether or not to buy your product. Your product argument must be compelling enough for him to risk the existence of his company. f) come up with some major cash to get this far. Now 'x' really needs financing. Are you, in your capacity as banker, going to loan 'x' $100,000,000 to set up in business, considering the above uncertainties. If not, how much are you willing to loan to 'X'? And at what rate and terms? Prime + 1%? Or don't you evaluate risk when making a loan?* Do you think that 'X', as a start-up company with no anticipated revenue for the next 6 months (very conservatively), can get a rate which will not further impede its competitiveness? Assume that 'x' has been able to do all this and has started building production facilities. Say that it takes 'x' only 1 year for the whole process, 6 months for the planning stage and financing, and 6 months for the building and training phase. What have we forgotten? Oops, those falling ASPs and margins you love to harp on! Is 'X' still going to be able to service that debt load with 'boxes' selling at < $500? Is 'X' going to be able to pay his labor, creditors and suppliers when his margin has fallen by 50%? Speaking of which, I didn't even touch on the aspect of coordinating and ensuring component suppliers. *BTW, do you also loan money to emu ranchers? I'll be happy to sell you a pair of breeding ostriches for $25,000. Or take out a $5MM loan to go into serious production. I am trying to decide whether a) you are playing Devil's advocate to manipulate the thread into formalizing DELLs bullish arguments; b) you are incredibly gullible for a banker; c) you are as 'naive' as a rock. DELLish, 3