Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Chuzzlewit who wrote (48566)	6/22/1998 8:33:00 PM
From: Techie	Read Replies (2) \| Respond to of 176387

So what you are saying is that with low cost components Dell could maintain good margins but nobody else can. Or better, are you accusing CPQ of cooking their books?

To: Chuzzlewit who wrote (48566)	6/23/1998 2:49:00 PM
From: rudedog	Read Replies (1) \| Respond to of 176387

Chuz - there is no question that CPQ took a bath on sub-1K commercial machines, since these machines were produced at a time when the street price was closer to $1500. These machines could at best have had zero GM, which would represent about an 18% loss in real terms when burden is figured. This single fact could have depressed their overall margins, given that these products had a low GM anyway (servers, with a 45% margin, generate the bulk of profit but not the bulk of revenue). Only someone completely out of touch with the industry could imagine that CPQ intended (or intends) to maintain a significant commercial business in sub-1K. I think they also took a bath on servers, since that was IBM's inventory excess and IBM was lowballing the server pricing in 1Q. The only products that CPQ intentionally targeted at the sub-1K market were the consumer products. From everything I can discover, CPQ actually targeted $799 as the retail for this line but managed to hold price above that point for the most part. Their new consumer line is lower cost yet. Depending on where the market goes, CPQ may surprise themselves with the consumer earnings, since the products are very hot and CPQ has not seen much pressure to go to the lower side of their price band. I have done a fair amount of thinking about CPQ's consumer business. I will be interested to see what Geoff has to say on this topic. I can only imagine what CPQ's income would have looked like without the large 1Q and 2Q contribution of the consumer group.