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.

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

To: Shane M who wrote (776)	12/24/1998 3:22:00 PM
From: Chuzzlewit	Respond to of 4691

Hi Shane, Thank you for your comments. I have a policy of not responding to ad hominems, so those who engage in name calling are signaling their unwillingness to debate and discuss based on substance. Yes, you are correct. My criticism (perhaps comment is a better characterization) is that Buffet doesn't deal with the evaluation of rapidly growing companies. I get exactly the opposite reading of PC demand from traditional marketing research firms like IDC, who are forecasting accelerating sales. Second, Dell is not a channel seller and deals primarily with business customers. And all indications are that business is booming. The ASP argument is really a red herring. Falling component prices allow companies to increase profits by lowering prices (taking advantage of the price elasticity of demand). Yet some analysts don't understand this simple concept. Businesses are profit maximizers, not profit margin maximizers. Yet, too hear these "analysts" talk you would believe that increases in component prices would be good. That's like saying that it would be good for an automobile manufacturer if its cost of producing an engine increased! Compaq is a peculiar story. They are attempting to transition themselves from a channel supplier to a direct seller. Their inventory handling in the channels has been particularly sloppy, and has been a major cause of their recent lack of profitability. I also believe that they will have problems digesting DEC. HWP has also had severe problems, and seems not to know how to build a PC profitably. BUT --- the indications are that INTC is having a blowout quarter. Dell is a 100% INTC shop (in contrast to its competitors who also use AMD and Cyrix chips). Also, there are recent reports of CPU shortages which are causing the white box manufacturers problems. So bottom line: I don't see a glut. Quite the opposite -- I see what looks to be strengthening demand. I do believe that we will see continuing industry consolidation. More of the marginal players (primarily the white box guys) will be squeezed out. I think a major question for the industry will be the nature of the PC. Will it really just become a set-top box as some have predicted (which would be very bad news for companies like Dell), or will it continue to expand in power and functionality. Time will tell, but my bet is on the latter, at least as far as business customers are concerned. Happy holidays, TTFN, CTC