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

To: Jock Hutchinson who wrote (82710)	11/29/1998 11:26:00 AM
From: Geoff Nunn	Respond to of 176387

Jock, let's stipulate that PCs are a commodity. You realize you can make a fortune in a commodity business if you can produce goods more cheaply than your rivals. Granted, pulling this off is quite a trick in most instances, because rival firms usually emulate the techniques of the industy leader and soon catch up. Yet exceptions can be found. One example seems to be Sam Walton, who over an extended period of years produced one of the country's greatest fortunes in what was arguably a commodity business. Dell's direct-sales model currently is allowing it to kick sand in the faces of its chief rivals IBM, CPQ and HP. Do you see these firms emulating Dell's techniques and closing the gap? How soon do you see this happening? It is not enough to assert that the industry has weak barriers to entry. There have been many credible discussions on this thread which suggest entry barriers are formidable (posts by Meathead, Bachman and LongonDell come readily to mind). The fact that market share among the largest 4 firms has been growing rather than fragmenting in the corporate pc sphere suggests that barriers to entry may well be substantial. Here's the point. In order for the profits of Dell to wither away as suggested in the model of pure competition, rival firms must match Dell in efficiency. I don't doubt this will happen eventually. The question is when. My impression is that Dell's competitors seem to be in disarray at the moment, and making little headway in closing the gap. Please explain what you see going on out there makes this impression wrong. Geoff