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

To: Geoff Nunn who wrote (48031)	6/17/1998 8:57:00 PM
From: FR1	Read Replies (1) \| Respond to of 176387

Why is CPQ so determined to increase market share? I own both DELL and CPQ because I don't know how this will all turn out. I too was confused about what CPQ's game plan was. The CEO for CPQ is horribly boring to listen to but in the last 24 hours or so, at the latest PC expo, he seems to have clarified things a lot. I have to admit he seems to have a point. CPQ has decided that making boxes is not going to be enough for them to survive in the long run (sic - there is no long run). CPQ has decided it's time to remake the company. They feel you have to become a full service provider for everyone using the new technology that is coming on line. The biggest new tech item, which most people seem to be ignoring, is broadband internet which will hit with a vengeance this fall. With it will come a whole new world with a lot of new markets. CPQ put a 16 page insert into yesterday's WSJ trying to brand themselves as a full service provider for numerous hardware, software and warm-and-fuzzy services. They are buying into cable internet services, configuring the browsers on the boxes they sell to default to CPQ's AltaVista site (you're gonna hear lots more), offering small (and big) businesses financial services to be used over broadband internet, etc., etc. Sounds like they will even feed your dog. Everybody says it sounds good. Everybody says it's a smart move. Everybody says *but..show me the money!. Who knows? God, it's great fun watching this and the big show is just about to start. DELL, on the other hand, has decided to be the low overhead lean and mean box maker. High end desktop boxes are not going away as has been shown with the server stats posted on this thread. You can't beat DELL because you can't make the boxes cheaper than DELL. So DELL is more limited in what it has to offer but what the hell: We make computers - you want a ham sandwich go somewhere else!*

To: Geoff Nunn who wrote (48031)	6/17/1998 9:09:00 PM
From: rudedog	Respond to of 176387

Geoff - Good analysis. I don't believe CPQ's quest for market share has any particular Dell focus. Partly, this is a hangover from the 1991 focus on driving units as a means of generating volume to reduce costs. The huge volume that CPQ developed (more than 11 million units in 1997) gives them the ability to hit the lowest cost tiers with all of their suppliers. But as you suggest, these may be false economies. According to insiders, this point was made very strongly by John Rose during the discussions about DEC integration. The focus needs to shift from share at any cost, over to managed cost structures in every product category. There will always be opportunities where a low margin strategy is justified to build share, but the most appropriate use of this approach is in emerging or fast growing product categories where there is a clear downstream ROI. Low pricing to build or maintain share in a more mature segment is harder to justify as a sensible business practice. I think you will see a shift in CPQ strategy towards creation of new categories, primarily integrated offerings that will combine products, services, and carefully planned financial mechanisms which help customers manage overall cost of ownership. This may mean that CPQ loses that coveted #1 status in some categories, but overall this should be a more effective use of their resources, resulting in more efficient operations and sustainable advantages that leverage CPQ's strengths in engineering capability and broad product offerings. I think that the DEC acquisition provides CPQ to do a long-overdue housecleaning of some bastions of a business model that no longer matches the market. I am eager to see the organizational and product announcements that will come from this effort.