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

To: nolimitz who wrote (112871)	3/28/1999 8:56:00 AM
From: hdl	Read Replies (1) \| Respond to of 176387

Yeah! The dealers won't do a deal if Dell sells cheaper direct. If Dell doesn't sell cheaper direct, Dell loses its edge over those who sell thru dealers,etc. Analogy. If Merrill Lynch sells stock trades for $10 on the internet, its brokers will scream because their customers won't pay $200 and up for a trade. If for internet trades, Merrill charges within 25% of its trades thru a broker, people won't use Merrill to trade on the internet.

To: nolimitz who wrote (112871)	3/28/1999 8:59:00 AM
From: rudedog	Read Replies (1) \| Respond to of 176387

DELL is not well positioned to directly replace the other vendors on channel programs with the big channel distributors since they are unlikely to offer channel partners a discount which would undercut their direct business and have not done so to date. DELL is still more expensive than CPQ or IBM in the channel - they really have no "Wholesale" pricing model. Instead, what DELL has done is to match the new style channel programs, especially the SMB programs from CPQ, which offer a hybrid model. By doing a careful analysis of where the smaller channel partners really make their money, DELL determined that hardware markup per se was not the major driver, but rather related services and other "value add". In addition, most of the smaller VARs are constrained by cash flow. DELL created attractive programs which actually use DELL's traditional direct distribution, but offer the smaller VARs several other incentives including favorable financing and "agent" fees for selling DELL hardware as a part of their systems. These programs were actually put in place first by CPQ, who introduced a comprehensive leasing and agent program in September '98 and expanded those programs dramatically in November. But DELL has communicated much more effectively in the field, and they start from a known position - everyone knows they are a direct seller, so there is no confusion about what the programs amount to. Also, as usual, DELL has had excellent execution on these programs, and has provided good end user satisfaction by not screwing up the orders, by routing service requests back to the original VAR (since that's where the VAR's real income is) and by creating a "touchless" model where the VAR appears to be the supplier but never takes title on the hardware and never sees it in his shop. They are not currently getting much traction with this model with the big channel distributors, who after all have traditionally made money by having local inventory and doing much of the assembly and configuration themselves. These distributors rightly see DELL as a competitor not a partner. However, more than half of the SMB business is from the smaller VARs, and DELL can do well simply by executing in that space. The vendor they are displacing is primarily "White box", not CPQ or IBM.