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

To: The Phoenix who wrote (60554)	8/24/1998 3:54:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Let me take a crack at some of your comments. PC Magazine rated Dell #1 in consumer confidence. So what. Survey mean nothing and rarely predict the future. Valuations are built on future earnings...not surveys. All indications are that Dell sales will continue to grow at three to four times the growth rate for the industry. The reasons are manifold, but this is the conclusion drawn by market research companies like IDC Dataquest and the Gartner Group. The fact that Dell has managed to increase its gross margins in what most see as a difficult pricing environment over the last few quarters bodes well, as many observers now believe that pricing pressures have abated. Putting these two factors together lead me to believe that earnings will continue to grow at a very healthy rate for the forseeable future You believe that consumers of business purchase DELL because businesses buy DELL. I'd like to understand your thinking here. I believe consumers are more price sensitive than business and they certainly don't get the quantity discounts that businesses do. Dell targets businesses and sophisticated home users. One of the tools that they use is to offer discounts to retail purchasers who work for large companies. This, of course is a two edged sword. On the one hand they attempt to get knowledgeable users familiar with Dell products as a potential sale to a company that is not currently using Dell computers, and secondly, familiarity with Dell computers means an easy (and hence cheaper) sale for Dell. For example, Boeing uses Dell computers. Dell offers a discount to Boeing employees. You use DELL's growing market share a "epirical evidence" that DELL will conitinue to grow. Interesting perspective. You point to my ignorance in the PC market... I believe you show an equivalent ignorance of market dynamics. I don't want to get into the middle of a foolish argument. Let me just say that jbn3 has repeatedly proven himself to exceptionally knowledgeable regarding this company. You do yourself a major disservice by not carefully evaluating his analysis. As for your last post about market entry....Given the internet, product placement is pretty easy and inexpensive. All you really need is a good contract with a quality and ubiqutous service organization such as Anderson, Perot Systems, Olivetti, etc.. and you're good to go. Even so, I wouldn't expect a start-up to go after this market, I suspect the competition will come from existing players. You're assumption that DELL is untouchable is what is laughable. Gary, there is a tremendous barrier to emulation here, and to realize it you need to appreciate the fact that you cannot simply copy a portion of Dell's business model. It needs to be all or none. The reason for this is the reliance by Dell's competitors o intermediate distribution channels. In order to make JIT work properly, there needs to be what Michael Dell calls "virtual integration" of the customer with the manufacturer. The problem is that this integration requires jettisoning the channel. This step will inevitably result in at least a short term loss of sales by the manufacturer as resellers scramble to replace their lost lines with other lines. The point is that JIT is inconsistent with channels, and using VARs and resellers to configure systems to order does nothing to alleviate the problem. The barrier to entry is great even if the entrant has a tremendous amount of cash. It will require the establishment of suitable SCM software systems (Michelle Harris can give you detailed information on how difficult that is to accomplish) and sufficient buying power to be able to compete on a price basis without going broke in the short run. Remember, you cannot inventory components because of falling component prices, so this precludes volume discounts. There is a lot more I could tell you, but I really think you need to do some digging for yourself. TTFN, CTC

To: The Phoenix who wrote (60554)	8/24/1998 5:14:00 PM
From: SecularBull	Read Replies (1) \| Respond to of 176387

Gary, please explain why DELL's competitors haven't succeeded in implementation of their own direct models (if it's so easy to do). I'd really like to know what's the hold-up. Isn't it the better way to go? LoD