Dog,
The article posted on the CPQ thread states that the low end consumer Presarios are manufactured by the Taiwanese.
That seems to be simple enough to understand. Other Presarios may be made in Houston but they are stating the the low end ones are made in Taiwan. read it for yourself.
I doubt that CPQ's efficiecy is high in view of their performance over the last year. Their operating expenses are a lot higher than DELL's.
www3.techstocks.com
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To: Russ LaCava (30938 )
From: Riechers Saturday, Aug 15 1998 10:51AM ET
Reply # of 30941
Thread...This article appeared in the Aug 5 Barrons "Weekday Trader" and I don't believe was posted here. Makes for good reading.
Steve
Cheap PCs Aren't Worth the Worry
By RIVKA TADJER
This spring, before everyone started worrying about a bear
market, investors had other concerns in mind -- like the
sub-$1,000 PC.
Some analysts argued that the spread of
cheap, powerful personal computers would
wipe out the profitability of PC
manufacturers and even hurt mighty Intel,
which has become a dominant force by getting people to
"move up" to more advanced PCs with the latest Intel
chips.
Investors promptly sold the stocks that would be hurt most
by this trend, including Compaq Computer, retailer
CompUSA and Intel itself. All three are off their 52-week
highs, as are Gateway and Hewlett Packard (which has had
other problems, too).
But it's looking more and more as if once the busy
back-to-school and Christmas seasons are over, the top
five -- Compaq, Dell Computer, IBM, Hewlett Packard
and Packard Bell, which between them account for half of
all PCs sold worldwide -- will be as healthy as they were
before the first sub-$1,000 PC came into existence. They
may even wind up to be stronger companies once
streamlined inventory management, online sales and
product and service diversification plans go into full
swing.
In fact, sales of sub-$1,000 PCs may already have topped
out, according to ZD Market Intelligence, a unit of
Ziff-Davis Publishing. "Sub-$1,000 PCs accounted for
48% of all consumer retail sales in February," says ZDMI
analyst Aaron Goldberg. "But that was the peak; for the
second quarter the number dropped to 40%."
Though Goldberg expects the number to climb again for the
Christmas selling season, he also says come spring of next
year, the percentage may drop again, as high-end buyers
shop based on computing power, not price.
And smart manufacturers are actually finding ways to make
money on $1,000 desktop PCs. "The ASP (average selling
price) of all PCs will continue to drop, but the rate of
decline will slow," says William Milton, analyst at Brown
Brothers Harriman. "By the time the $1,000 PC is the norm,
the production of these PCs will be more efficient and
there will be other computer products manufacturers will
sell as well."
Also, most of the PC makers are diversified companies that
don't stand or fall on PC sales For example, at market
leader Compaq, which has 14% of the world market, "PC
sales still account for [only] 5% to 10% of its total sales
revenue," says Walter Winnitzki, computer analyst at Paine
Webber. "So the $1,000 PC can't have that much effect on
business." PC sales represent a small chunk of IBM and
Hewlett Packard's business, too -- and even Dell gets only
10 percent of total revenue from consumer PCs, Winnitzki
adds.
The cheaper machines have
yet to catch on in the corporate
world, whose PC purchases
amount to twice the dollar
volume of the consumer
market. "The $1,000 PCs are
not penetrating the corporate
market at all yet," says
Winnitzki. ZDMI's Goldberg
says that corporate purchases
of sub-$1,000 PCs, while
growing, remain negligible -- only 5% of all sales by the
end of the second quarter, up from 2% in January 1998.
(Dell officials say they're not even selling sub-$1,000 PCs
to companies because there has been no demand for them.)
Meanwhile, the leading PC makers have responded to
dropping prices by wringing more costs out of their
operations -- making manufacturing more efficient and
thereby stabilizing profit margins. "In general, I've seen
gross profit margins in the PC industry stabilize at roughly
20% over the last 18-24 months, despite falling average
selling prices," says Winnitzki.
In fact, says Winnitzki, "Compaq's lower-priced Presario
carries the highest return, according to Compaq." That
model, the Presario 2254, costs $799, after a $100 rebate.
But inventory costs are next to nothing, because demand is
so high the stores can't keep the machines on their shelves.
"The rate of inventory turns over the last couple of quarters
at Compaq are 100 times for consumer sales," says
Winnitzki. Compaq, which outsources manufacturing to
Taiwan and has streamlined distribution, is trying to move
toward Dell's direct-sales model, so excess inventories
don't weigh down profits. Other PC manufacturers also are
heading in this direction. |
