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

To: Chuzzlewit who wrote (56794)	8/6/1998 5:39:00 PM
From: JRI	Read Replies (1) \| Respond to of 176387

I agree that CPQ with maintain (some sort of) an advantage, (what the % is, I don't know)...due to larger unit volumes (on each individual order)...maybe I wasn't clear enough....Right now, CPQ accrues a cost advantage in two ways: (1) sells more units and (2) (Due to its model) orders in larger unit volumes.....my point is that part (1) may not exist in 2/3 yrs or so, so the absolute advantage CPQ owns over Dell right now should shrink in the future (but not disappear, due to 2)......Unless (one day) Dell sells so many more units than CPQ.....or suppliers change the way they discount....

To: Chuzzlewit who wrote (56794)	8/11/1998 11:48:00 AM
From: Geoff Nunn	Read Replies (1) \| Respond to of 176387

Chuz, I fail to see why a supplier should want to give discounts to its largest customers based on size of order not rate of consumption. Suppose customer A orders 240,000 per month while customer B orders 8000 per day. Expressed as rate of purchase per month these customers are equally important. Yet, according to you, the supplier who gives quantity discounts will offer a lower price to customer A. But why should this be? I would think, other things being equal, the supplier would want to offer the lower price to customer B. The supplier (Intel, Seagate, etc) will want to minimize its finished goods inventory. Customers which make infrequent, large purchases (e.g. CPQ) make it necessary for the supplier to carry a larger inventory. Customers like Dell, which make frequent, smaller purchases allow the supplier to smooth out inventory and carry less of it. Customers like CPQ impose costs on the supplier (higher capital costs), therefore I would expect them to pay a higher price. Of course, whether CPQ in fact pays less than Dell for components is an empirical question. Have you seen recent data? Geoff