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

To: DoggyDogWorld who wrote (2188)	10/22/1998 9:00:00 PM
From: Bilow	Read Replies (1) \| Respond to of 2578

Hi DoggyDogWorld; About differentiation helping DELL... Please explain. I don't see how less differentiation would help any of the box makers. Less differentiation destroyed most of the graphics board industry, and the companies that remained were the ones with the best technical abilities in the design of chips, not boards. When making the box becomes totally trivial, the box makers are replaced by the chip makers, just as has already happened in the pocket calculator industry. (I.e. Texas Instruments and Hewlett Packard make their own calculator chips, as they have since the beginning.) The companies that assembled calculators from other people's chips are now long gone and forgotten. What will happen is that the box makers will first be pushed into the higher end marketplace, as higher end personal computers will have more box-maker engineering (and therefore differentiation and value added) than the low end ones. The reason that high end stuff provides a (temporary) high profit area is that high end computers have more transistors, and are therefore harder to integrate. But integration provides a significant increase in performance, and integration levels are constantly increasing. So, as time passes, the higher end personal computers will also suddenly become much cheaper and more standardized. This will result in the commoditization of the high end market, too. The final straw will be what happens when the big CPU chip makers start producing their own extremely cheap boxes. Micron Electronics was way too early, and, in addition, Micron doesn't have the critical CPU technology. Right now, IBM makes some of the best SDRAM in the world, but just try and get the latest and greatest parts if you're an outside customer. Up to now, there has been quite a bit of manufacturing and design technology in the box makers' factories. But as that box maker engineering effort gets converted by integration into chip designer system-on-a-chip engineering effort, the box makers will have less of an advantage against both the chip makers and each other. The final straw will be when the chip makers roll out the latest hot new integrated CPUs, but only offer them to their own, internal, box making divisions. Soon after that, the box makers will be in corporate heaven. -- Carl