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

To: JRI who wrote (47884)	6/16/1998 6:20:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

John, that's exactly the point I was trying to make, and the point Michael Dell hit on in the interview! And that creates a tremendous opportunity for Dell, because the service market knows Dell is a highly focused business and will not trespass on its turf. It's the same schizophrenic attitude that they seem to have towards the channel members. Consider: they say they will maintain a web presence so customers can buy direct if they choose, so is it any wonder that at least one reseller, Ingram, will become a competitor? And why not? Why should they sit idly by and watch Compaq take business away from them? You can't have it both ways, and that's what Compaq has been trying to do. I suspect that they are trying to hedge their bets, but in so doing they are caught between two opposing forces. TTFN, CTC

To: JRI who wrote (47884)	6/18/1998 1:09:00 AM
From: rudedog	Respond to of 176387

John - The point I was making about PR was that Dell deflected the issue of their change of service partners not by addressing it but by pointing to a different service segment where they (Dell) will have new opportunities. I think this is a PR spin but I don't think there is anything dishonest or even misleading in the information. It's just good image control. A couple of points in your post that I disagree with. First, consulting is not a high margin business. IBM manages about 23% GPM on their consulting, DEC was less than 30%. The belief among the consulting portions of these companies is that the HW guys give away consulting services to drive sales which depresses overall margins. The hope is that the consulting portion of the business is at or above average GPM so that it is not a drag on earnings. The consulting business needs to be a key component of an integrated strategy to be good business. There is no doubt that the independent consulting houses will be more inclined to work with Dell - I have been of this opinion since the CPQ merger was announced. But remember that DEC was CPQ's service partner since 1995. The Dell relationship with DEC service was for break-fix support. The CPQ relationship was for a broad range of service offerings. ANdersen, EDS et. al. were already moving away from strong support for CPQ so the acquisition of DEC just accelerates that trend. But the idea that these consultants can drive HW sales through recommendations is not supported by the evidence. At the time of the 1995 announcement, CPQ's position to analysts was that the Cap Gemini's/Andersen's/EDS etc did not have any significant effect on the hardware recommendations to their clients. CPQ had invested a lot of time, effort and hardware to develop those relationships only to find that the mix of HW in accounts serviced by those companies reflected the general market trends, so this money was wasted since there was no incremental revenue returned. The customers had their own ideas about what HW they wanted to use. HP also came to that conclusion a few years earlier when they stopped their programs to drive HW sales via the independent consultants. If this is true then the endorsement of the independent consultants will not directly drive HW sales. What it does do is give those companies a reason to provide Dell with the enterprise consulting capability they need to hit higher in the food chain. Dell will count on their own marketing and sales capability to capitalize on the opportunity. So I think there is a real advantage for Dell, since this fits their highly leveraged business model - they get the same enterprise halo as CPQ but without the cost of the consulting organization. But I don't think CPQ cares much what the third party consultants recommend given that it has almost no effect on customer demand.