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

To: jim kelley who wrote (58102)	8/13/1998 4:08:00 PM
From: jim kelley	Read Replies (1) \| Respond to of 176388

Re: Expectations and the spin meisters Regarding the delay in the run up. I think that some of the MM's have bought into the stories put out by the spin meisters from CPQ, et al. The spin artists have put out a number of stories which while dubious or outright false on close analysis have nevertheless created some clouds of uncertainty over DELL's future scenarios. This tends to promote the argument that DELL's future growth will be slower. Thus DELL deserves a lower P/E going forward. This story has been being built up gradually. we have witnessed Rudedog, Petersen, Spaulding and others putting out various parts of this spin story. The lead spin story: CPQ, IBM and HWP are going to join together to kick DELL's but. These companies are getting their BTO, JIT manufacturing capabilities on a par with DELL. CPQ has cleared out its 10 weeks of channel inventory and is now sitting on only 3.5 weeks. CPQ's cost of goods is lower than DELLs. CPQ is going to match DELL's price and quality and stymy their growth. Another aspect of this same story is the spin that CPQ can bundle and price its service and hardware at a price that is lower than DELL because of their acquisition of the DEC service operation. The latest addition to this spin story is the news that CPQ is pricing its equivalent products at 10% under DELL. This story is attributed to Oppenheimer without confirmation. Rebuttal: CPQ, HWP and IBM are just as interested in kicking each other's but as they are in kicking DELL's but. CPQ, HWP and IBM already attempted to thwart DELL's growth and failed miserably and lost money attempting this tactic. In attempting to do this they lost several quarters worth of profits. While CPQ's channel inventory was down at the end of June, its internal inventories were as high as ever 6-7 weeks. Thus CPQ's inventory pipe is 10.5 to 11.5 weeks compared to DELL's 1 week. This is a cost advantage of 10% in COGS. In addition, DELL's operating costs are significantly lower than IBM, CPQ, or HWP. The price/feature/service comparison performed yesterday shows that the 10% under story is false in several respects. It appears that DELL is still priced at about 10% under CPQ for equivalent product/quality/service. This means that DELL's margins are likely to be improved this quarter because their cost advantage over CPQ is greater than 10% due to operating efficiency. DELL does not appear to have any problems in service. It consistently gets the highest rating for reliability and service from the user community. Thus though they have no discernible problems expect to hear this argument over and over again over the next few quarters until it becomes obvious that it is not true. Remember CPQ is a bloated and inefficient operation with a low reliability and service rating for its PC products.