Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Chuzzlewit who wrote (72042)	10/14/1998 4:56:00 PM
From: jhg_in_kc	Read Replies (1) \| Respond to of 176387

Chuz, If I read your post to Jeff correctly, something is causing the prices of component parts which Dell buys to rise. What is the cause? for this firming? With the decline in the US dollar, overseas Dell pays more for its raw materials. The question that concerns me is why? why is the dollar declining and component prices firming. The answer to that question may determine whether this is a bump in the road or a new trend which will squeeze profits. I have no idea having just read the post about parts and find the dollar/yen relationship hard to comprehend at best let alone when we have last week's volatility. Let me know if you have any more thoughts. I hate to see Dell in danger. jhg

To: Chuzzlewit who wrote (72042)	10/14/1998 5:03:00 PM
From: Jeff lin	Read Replies (3) \| Respond to of 176387

If dollar is getting weaker, component price will keep getting firmer, at least. So if the PC demand projection is right, either margin gets smaller or ASP needs to be up (very hard to do that I guess).

To: Chuzzlewit who wrote (72042)	10/14/1998 5:09:00 PM
From: Venkie	Read Replies (1) \| Respond to of 176387

Where have you been my friend..I have been lonely with all these bears

To: Chuzzlewit who wrote (72042)	10/14/1998 5:28:00 PM
From: D.J.Smyth	Read Replies (1) \| Respond to of 176387

Chuz <<Jeff, I agree that this is not good for Dell. >> certainly not true now anyway, nor has this been true for the past eight years. when Dell says component costs have "firmed" (per my conversation with them), costs have firmed in some categories but continue to fall in others. (a) component prices have been dropping 1% a WEEK throughout this quarter and have dropped at a rate of about 50% year over year. component prices have been dropping steadily since 1992. You can buy a 10gig HD now for the same price you bought a 512K drive in 1992. (b) two things generally happen 1) component prices firm in HD while the number of gigs go up or 2) prices fall while the gigs stay the same. (c) new technology has caused the cost of component prices to fall, NOT just Asia's economic problems. (d) technology component prices adhere to a COMPLETELY different cost model than does commodity prices such as oil, wheat, barley, etc. (e) any minor 'stabilization' or 'uptick' in component prices is met by equal decrease in prices by other technology parts (f) Dell is bringing their own HD manufacturing facility on line, as licesned through Data General (g) labor costs are by far (about 60%) the single biggest cost factor in determing cost for PC construction. component prices about 20% to 25%. (h) even if HD costs ticked up (which they are NOT doing overall) as Jeff is suggesting, you're talking less than 1.25% of the total cost of PC manufacturing which translates into less than 1 tenths of 1% to net profit. as for the value of the dollar vs OTHER asian currencies - Dell buys most of its component costs in non-yen denominated dollars or other Asian currencies which have not fluctuated relative to the dollar as the Yen has so fluctuated. look at the Korean won relative to the dollar and the Thai bhat, not the yen. it's not enough to be right regarding an issue though. what is driving this market is a lot of fear based abstractions

To: Chuzzlewit who wrote (72042)	10/14/1998 8:31:00 PM
From: stock bull	Read Replies (1) \| Respond to of 176387

Chuzzlewit, I must believe that Dell's procurement contracts have taken into account the possibility of price increases. I would think that the contracts have clauses that control the rate of price increases for the components/materials that are purchased. Also, price increases would affect all the box makers. Since the other pc companies have been cutting inventory turns, they too will feel any price increases sooner than latter. Although, they will probably experience the increases a little latter than Dell...as I said, this would depend on the type of contracts Dell has with its suppliers. Jobs (Apple CEO) said today that Apple's inventory has been reduced to 3 days. (He may have said 4 days, don't recall the exact number). By the way, he gave Dell a compliment by says they do an excellent job in managing their inventory. He noted that Dell's inventory was at 8 days. So, I not so sure that component price increases will hurt Dell without also hurting all the other box makers. Stock Bull