To: stock bull who wrote (102629 ) 2/18/1999 12:51:00 PM From: Mohan Marette Read Replies (4) | Respond to
Dell & Low-cost PCs.Will low-cost PC sales spell the end of Dell's stellar record? Some on Wall Street believe it has put together a way to target lower-profit products without significantly lowering profits. In recent months, the company has begun to beef up its sales of software, networking gear and computer add-ons such as printers alongside its computers. "Given Dell's management track record, it's a pretty good bet they will find new growth," said Phil Rueppel, vice president at BT Alex. Brown. .... Dell has an advantage, however, with its Internet sales, now running at a $14 million-a-day rate. As part of its effort to use the Internet more, the company is also revamping its service operations to allow customers to search its Web site (www.dell.com) for answers to common problems -- and converse with other Dell customers for potential remedies. The new approach should allow the company to service more customers without having to rapidly increase its service force. In the past, the company has said it avoided low-cost PCs in part because novice buyers who tend to purchase lower-cost machines added inordinately to service costs. Vadim Zlotnikov, senior technology analyst at Sanford C. Berstein & Co., says the company's investments in Internet-based self-service can reduce the costs associated with selling to novice buyers. "They felt the spending on information systems, on an Internet site has reduced the cost of serving these customers. If this is true, and they believe it to be, an incremental sale is incremental profit," he says. Mr. Zlotnikov expects the company to reignite sales to a 42% annual growth rate, while only modestly lowering the 22.4% gross margins it recorded in the last quarter. "If Dell can significantly reaccelerate the revenue growth, the stock will go back to its highs," he adds.
