Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Diamond Jim who wrote (78450)	4/11/1999 8:25:00 PM
From: nihil	Read Replies (2) \| Respond to of 186894

CPQ committed an economic crime when it started to break the implicit agreement among the top tier boxmakers that they would not cut the price. Everyone was competing using Pentium MHz as the only significant product differentiator. Dell, CPQ, IBM, HP merely nibbled at the margins of everyone's business. Dell had the lowest costs and undersold everyone. Compaq tried to segment the market and move into the cheapest segment (previously mom and pop). AMD chips selling cheap (and well under average total cost), the low-priced machines cannibalized the rest of tier 1 market, and CPQ, IBM, and HP started taking unacceptable losses, leading to a futile attempt to copy Dell-direct. It remains to see how well Dell (which never entered segment 0) survived, but it seems to be --- quite well. The refusal of the tier 1 oligopolists to accept the (modest) cost-based price competition from Dell and to cede it market share (and profit share) led to the collapse of the PC tier 1 market. The future of the box business as IBM says is grim. Once business purchasers start shopping seriously, they will probably go for price, reliabiliry and on-site warranty. For small buyers Dell is very attractive. But white box makers are making terrific, impossible to beat bids. These are nearly all Pentium III's. The unknown supplier dare not gamble on the chip, especially because most of the RFB's are specified in terms of PIIIMHz. Instead of a Big 4 in the PC commercial business, I think it may quickly boil down to Dell and the White Boxers. IBM and HP may get completely out of manufacturing PC's and negotiate their manufacture will cheap suppliers (like Dell). These guys can always be beat on price in 3 oclock AM infomercials by AMD equipped boxes made by elves, but my guess is that the new PC market is going to be great for Dell and INTC. I also look for super deals in China and India and Brazil (huge potential markets all), for Dell and INTC. The governments in these places have no incentive to import when they can welcome the most productive and efficient marketers in the world to come aboard. The Dell-direct model requires factories close to customers and coordination with parts suppliers. Dell should acquire FedEx and cut themselves a deal on rates.