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

To: Geoff Nunn who wrote (48146)	6/19/1998 4:30:00 PM
From: Jim Patterson	Read Replies (2) \| Respond to of 176387

RE: Jim, what's your outlook on the pc businesses of any or all of the following: CPQ, HWP, IBM, and PBell? CPQ's pc segment used to be profitable, but isn't any longer. HP has never made a dime on its lower-end PCs. IBM's pc business is losing money. PB long ago mastered the art of growing market share with the pedal to the metal, while losing money. (Today, it's CPQ and HP that are playing in that game). PB recently closed two plants. PB's planned IPO was postponed due to poor profitability. Quite frankly, the industry -with the exception of Dell - looks sickly. HWP, IBM, and CPQ(with the addition of DEC) Don't need to make money on PCs any more. I see the future of the PC business as an add on to solution business. IBM makes most of its money on software and solution to problems. Computer hardware is needed to implement these solution that are software and support based. If you examin the steps DELL is starting to take, They may already be headed this way also. (Problem is that this business model has a different multiple than DELL currently has.) As for PB, they will not be under sold. They are offering a 333 M2 chip in consumer PC, er will all of their PC as they are basicaly a consumer company. CPQ is not going to be under cut, so they will price their machines agressively at Comp USA. Now you walk into a CPU store and see equal PB machines for $X, and CPQ, IBM and HWP machines for $X + 1-10%. Then you go to your IT guy and find out how much your company is paying for PC's. Guess what happens, All PC prices fall as a result. WE already have hashed the rest of this one out. PBell has NEC pockets and they are of fair quality. I don't see them disapearing. The challenge that DELL faces is having to compete with companies that no longer care about hardware margins. As long as DELL maintains their blistering growth, everything should be fine. If there is a blip, the company will in all likely hood be unfazed. It is the Stock that will get clocked. DELL's market cap is 2 X CPQ's and CPQ still does 2 X the volume that DELL does. (Don't get mad about rounding) As for the Next 5 years, I don't care. I am not in the trade for that long. Heck, If DELL were to fall 60-80% I might even go long, and that could happen in the next 5 years. Asia matters. ASPs Matter. Slowing industry revenue growth matters. slowing industry unit growth matters. Spending all free cash to buy back stock matters. How much higher can a box makers gross margins go? The hardware demands of todays software vs todays hardware matters. More than 4 MB on a video card is overkill More than 5 GB on a HD is overkill More than a P II 266 is overkill More than a 33.6 modem is overkill (and a waste of money, Mine never go that fast anyway) More than 64 MB of DRAM is overkill. These are for most computing needs. In order to get higher prices, builders need to put more than this in a box and it ain't needed. It won't be needed for some time to come. BX 100, Great, but it don't go any faster, most users can't tell the difference....Yet Is the P II 450 going to stimulate new demand ??? Seeing as the 350 and the 400 did not do much, I don't see the 450 lighting a fire to the demand of PCs Will win 98 make a difference ??? No, there may have been some delays in purchaces, but once that is over, about 1 week, it won't make a difference. Most users are not like us on SI. We are the motor heads, Crome plated rods, four on the floor. Most users just want it to work and not be confusing, Like an automobile or a typewriter. CEO's want their information systems to work and work well and they don't want to pay a lot of money for un-neccessary hardware that you and I think is cool. They want the solution provider, weather it is IBM, CPQ, HWP or anderson consulting, to get good reliable hardware at the best price. If DELL does not have the best price, they will have trouble maintaining their current growth trend. If that happens the stock goes back to $20. Jim