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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (341)	9/24/1998 10:15:00 AM
From: jhg_in_kc	Read Replies (2) \| Respond to of 4691

With regard to Dell's competitors and competition in the industry in general, I expect Hewlitt Packard and Gateway to be marginalized very soon. Dell and Compaq will be the leaders, ahead of IBM. THe industry will be an oligarchy with 3/4 or more of the market going to these top three. A new kid on the block would have to have Warren Buffet kinds of resources to build new factories, locate them strategically around the world near Dell's plants in Ireland, Malaysia, Brasil and China, and convice component makers to collocate nearby and bear the costs of inventory and cut a deal with Sony for free monitors and Sony delivers your computer for free, set up a $6 million dollar a day Internet business from scratch, and on and on, and even then the new competition would be known as a Dell imitator not the real thing and would be years away from turning a profit. If a competitor were willing to do this, lose billions of dollars, then there might be a successful price war and a chance for profits and Dell would be damaged. But who in his right mind would want to do this absent some kind of personal vendetta. Mike Dell has stumbled across the ideal way to build and sell computers. Inventory is the kiss of death so he has none. His CFOk, tom Meredith, is CFO of the Year this year. Dell's, I believe it's called cash conversion cycle, is a negative seven days or thereabouts. He uses his customer's money for this long before he pays any bills. Dell is so efficient that Each Dell employee generates over $750,000 in revenue! Now if someone else had used this model several years ago, there would be a real fight for leadership right now. I worry that Dell is too good to be true, but so far I see no evidence of this. I wish I knew what Warren Buffet would say about this Dell phenomenon. Two years ago I said the stock was too high. Now it is over half my portfolio. It grows as others lanquish. jhg