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

To: Meathead who wrote (116128)	4/10/1999 11:33:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Or, is the land, building, equipment and staffing costs so cheap that it's a don't care? I think that's the case. I can't lay my hands on a balance sheet at the moment, but I bet that total fixed assets are running under $500MM, so we're talking cheap! And this is the essence of the business model. Squeezing the most cash flow out of the investment. Let's do a hypothetical. Imagine we are talking about a facility that costs $100MM, and generates 2.5MM units per year. Let's assume that the ASP is $2,200 and that the fully absorbed cost is $2,150 (which would include SG&A). Now you get incremental profits of $125MM pa! But it gets better. Assume the expected lifetime of the plant is 20 years with no residual value. That's a return of 84% per annum. That illustrates the point behind efficiency in manufacturing -- it isn't the profit per unit, it's the total profit generated divided by the assets utilized that is the key. Inventory turnover is just as important, and in many cases more important to profit margin. And we haven't brought in the concept of CCC in this. Analysis like this makes my palms itch! TTFN, CTC