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Technology Stocks : DELL Bear Thread -- Ignore unavailable to you. Want to Upgrade?

To: Bilow who wrote (1972)	9/27/1998 7:33:00 AM
From: rudedog	Respond to of 2578

Carl - Thanks for some really well thought out and perceptive posts on the topic of vertical integration. You pointed out a couple of things I had seen but not really connected up - in particular the fact that continually falling prices for components may not be the inevitable march of technology, but may instead be market forces driving a manufacturer to an increasingly unprofitable position, which eventually means the buyer of those components will have to consider buying the failing supplier and becoming vertically integrated, or paying a higher price for the component or service when the market settles out with fewer players. This can also lead to a third possibility, one we saw last year with the CPQ/DEC purchase. Instead of buying the failing supplier, the company which has decided to pull in the capability and become more vertically integrated instead goes after the largest and most successful remaining player. There are a lot of reasons for this - the failing player may have lost key technologists or management on the slide down, or may have had other inefficiencies which contributed to falling out in a weak business climate. The move to take a stronger player in also deprives the competition of access to the best in class product (as happened when Dell had to give up DEC service because CPQ bought DEC).

To: Bilow who wrote (1972)	9/27/1998 11:14:00 AM
From: rudedog	Read Replies (1) \| Respond to of 2578

Carl - A few more thoughts. It seems obvious from the content of recent posts that the most enthusiastic Dellheads have not been through the hypergrowth cycle before, so they really believe that the pattern of the last few years is the way things will be forever, kind of like assuming that the steep climb angle of an airliner leaving the runway in New York will be the way it will fly all the way to Los Angeles. Physics be damned!!! We're going up, up, up!! But the pattern emerging at Dell now is so similar to what happened at CPQ 4 years ago, and Dell has so much less technical infrastructure to make the transition, that I have to assume someone in Dell management sees the parallel and understands what Dell can and can not do. Some of MSD's recent remarks indicate that they know where they don't want to go. Mike Lambert, when he was at CPQ, planned to drive midrange servers into the enterprise without a dedicated account management strategy and a strong service component. He was probably 'ahead of his time' on the growth of standard components in the enterprise. Also, the CPQ field could not execute on the strategy due to both level of expertise, and the dependence on the channel for most of the sales. But here are other compelling factors which hampered the plan, including the fact that CPQ needed to be able to create and drive those standards, not just follow them, to maintain their growth. Dell seems fundamentally opposed to growing by acquisition, and also to picking up any mass in their operations. It keeps them nimble, but it's a small player strategy in the enterprise. The good choices for acquiring the technology are also disappearing. Stratus would have been a relatively inexpensive way to get good technology (ISIS is fairly good stuff) and also some enterprise customers. But they're off the block. DG would give them storage technology but not any of the other pieces. If Dell is as sharp as everyone says, they will go in some completely different direction. They will not achieve required growth if they stay on their current course.