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To: DownSouth who wrote (717)	3/3/1999 2:45:00 AM
From: kas1	Read Replies (1) \| Respond to of 10934

> All of their innovations are in marketing, > logistics, and distribution. this has been true of several of the best performing stocks in the past decade: MSFT, WMT, AOL, and others. while it's up to you whether you want to invest in that kind of company (i prefer companies with a pure technological "vision"), it has never been an impedement to company performance or stock performance. just ask bill gates! :-)

To: DownSouth who wrote (717)	3/3/1999 2:05:00 PM
From: stockman_scott	Read Replies (2) \| Respond to of 10934

*OT** DownSouth: Some thoughts on DELL and boxmakers: IMHO, you should not give up on boxmakers, but be VERY selective about investing in them. CPQ is the wrong kind of company to own. Recently they have stuffed the channels to hit short term analyst targets. Now we see them warning. This company has management, marketing, and distribution problems. With DELL you are getting a firm that is outstanding at direct sales, marketing, manufacturing, and logistics. They also have THE BEST management in the industry. Here are some comments on DELL I posted to another SI member in the last few weeks: <<I strongly suggest that you do some more homework on DELL. I will make a few comments but I don't have time to teach you everything. Some thoughts: Why did Harvard Business School choose to do a business case on DELL's unique virtual integration model?...They said that "Virtual Integration may become a new organizational model for the information age." I suggest that you read this case and learn a little more about how DELL has mastered the art of partnering with suppliers and customers. This is not easy to duplicate and to date no competitor is even close in this area. DELL uses ITWO technologies rythmn manufacturing software better than any other firm globally.. It has been highly customized by DELL and I suggest you PM Michelle Harris who is very familiar with this project. She has NEVER seen a client embrace the opportunity to optimize the build to order model like DELL. Any firm can buy expensive SAP software like CPQ. I suggest you see how they are progressing. IMO, they do not have the talent, the culture, or the right processes in place to embrace the opportunity to fully optimize. Ask Michelle for some insights on their competitive challenges. It is important to get information from sources who have "been inside" a target firm and who also understand the market well. Don't rely on the traditional media to tell you what is really going on. You contend that "DELL has been a high end snob." It sounds like you wish you had owned the stock for the last few years. I cannot help you in that area. I have met Michael Dell and many of the employees and they are not arrogant. IMO, they are hungry but ready and willing to partner with customers. They are also commited to constant and never ending improvement. I strongly urge you to read Michael's new book "Direct from DELL: Strategies that Revolutionized an Industry." It is by far one of the BEST business books I have read in the last few years. It also helps you understand the heart and sole of DELL and why are so unique and difficult to copy. On page 200 M. Dell talks about "how DELL likes to focus on customers and not the competition." DELL really finds out what is needed, does its homework, and DELIVERS. On page 202, M. Dell says "We didn't move into the workstation market until a year after other major competitors did. But within 9 months, we became number one in the US and number 2 in the world. Rather than rushing in to be first, we took the time to evaluate the opportunity carefully, figure out the optimal strategy, and be the best." You mentioned that competitors are starting to get a grip on the direct model. Hmmmm......who is still growing at well over 3 times the industry rate? Who had a 95% increase in server sales in the most recent period? The simple answer to those questions is DELL. Many competitors are trying to copy DELL and for them dealing direct is the ultimate channel conflict. Only GTW and MU are truly direct and they do not have a large position in the corporate market. Alot of people think of DELL as "a boxmaker." What about their servers, storage products, a new upcoming auction service, and the willingness to launch a major new e-tailing initiative soon. Don't ever underestimate DELL. They also are the clear PIONEER in selling online. They currently sell over $14 M every day online and are moving towards doing over 50% of their business online by the end of the year 2000. Competitors are dreaming about this type of efficiency but they are not even close. DELL has also created thousands of "Premiere DELL.com website pages" that are customized for targeted large customers around the world. This increases their level of service and enhances customer loyalty (all in a very cost-efficient manner). You also need to remember who has over 60 inventory turns each year....no one is close to DELL in manufacturing efficiency. FINNALLY, you said DELL has "no proprietary technology" and DELL "spends very little on R&D." Please work harder to understand DELL before you make statements like this. Last year DELL spent over $300M on R&D and received over 250 patents. Yet, DELL focusses on "RELEVANT R&D." Chapter 10 in Michael's new book is on Learning direct from the source. This company carefully develops products from the customer's point of view. Page 192 and 193 in the new book talks about Collaboration on R&D. DELL is a master at this. Tow Gorillas (INTC and MSFT) account for a little over half of the $12 billion spent in on R&D in the PC industry. DELL spends about 1/3 of a billion dollars and employs 2500 to develop technologies to meet customers' needs. (this does not include DELL investments in technologies like the internet which Michael claims have helped transform business processes). For this investment, DELL has delivered products that often continue to beat the competitors -- in terms of market demand. Remember, DELL is a master at conducting efficient R&D and partnering when necessary. On pg. 194 in Michael's new book he says "By understanding the drivers of value and where value is created, you can make the right decision about when to partner and when to do things yourself." Well DELL has grown into an $18 billion firm and generated the highest ROIC (return on invested capital) of any large established technology firm. The marketplace has spoken too since in the last decade DELL's stock has risen over 36,000 percent. DELL is still growing, innovating and continues to re-invent itself along the way. I think there is MUCH MORE to DELL than you realize. I hope this post is informative and useful. In closing I'll leave you with one of my favorite quotes from the New York Times: "DELL Computer....is perhaps the purest example of the efficiencies made possible by information technology." ------------------------------------------------------------------------------------------------------- Good luck with your research and your investing decisions. Regards, Scott