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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: jim kelley who wrote (52131)	3/16/1999 6:56:00 AM
From: Earlie	Read Replies (1) \| Respond to of 132070

Jim: As noted earlier, I use some very amateurish indicators. They are neither proven nor trustworthy at this point in time, but they indicate that Dell is slowing. Mr. Dubois places considerable value on a few things that I would not, although I applaud his efforts to put the pieces of a puzzle together. A few points where we might differ include: - Dell has to cut prices to retain or acquire additional market share. Since the company is still not a player at the bottom end of the spectrum, and as this is where most of the action is, Dell will be forced to cut prices aggressively at its more expensive price points. This is hard on margins. - The P3 is a complete sales disaster. It will do nothing for Dell except soak up advertising dollars that provide a "nil" return. This is also hard on margins. - Despite the claims to the contrary, neither government nor big business are major purchasers of PCs this year. This is Dell's bread and butter. This is hard on the revenue line. - Dell has targeted smaller businesses, but this is a brutally competitive arena. It is also an arena where price is important. Sales into this sector will also hurt Dell's margins. - The "pipeline fill" comment is bogus unless one accepts that Dell has given up its "direct sales" business plan. - The "direct sales" niche is now very crowded and very competitive. Dell has been joined by some big bruisers. Reminds me of a brawl in a small room,.... people will get hurt even if they are good street fighters. - The "deferred spending - Y2K" stuff is dreaming. - MSFT actually did warn in its own way. Why bother to tell the world that you are doing some accounting shuffles ($400.0 million gets moved out?). Since MSFT gets its royalties as a PC is built, and not when it is sold to an end-user, that company is in a poor position to provide any guidance with respect to final sales, which is what counts for Dell. - Intel has both plenty of inventory and slow sales. Without accounting legerdemain, INTC's Q1 will be a big disappointment. I still think we get a warning, but it really doesn't matter, as a bad quarter is a bad quarter. The bottom line is that Dell will suffer right along with the rest of the PC producers. Additionally, given its silly PE and insane price-to-book, I'll remain comfortably bearish on Dell, especially as the insiders are as well. (g) Best, Earlie