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

To: Mohan Marette who wrote (119520)	4/21/1999 11:19:00 AM
From: rudedog	Read Replies (1) \| Respond to of 176387

Mohan - 1)YOY revenue seems quite healthy,but it looks like a lot of it is coming from consumer business,probably the sub 1000 segment. CPQ's consumer business is less than 10% of sales, and sub-1K is less than half of that, or at least that was the picture in 1998. So it seems unlikely that this was a major factor - if that were true it would mean, given the ASP erosion, a huge jump in CPQ consumer unit sales and I have just not seen that happening. More likely is that the revenue jump was from CPQ's midrange server sales, which have continued strongly. A gentleman I spoke with last night said that a memo circulated intrnally yesterday at CPQ in the mainstream server group claimed 1Q99 sales were ahead of plan on every product line. If that is true (and I have no reason to doubt it) then they must have done some discounting or the profit numbers would be better. They also said sales of high-end products are way below target. We also know that Dell is gaining market share in the high-end segment while their's is eroding. This is apples and oranges. CPQ's "high end segment" is machines $500,000 and over - DELL has no products or delivery mechanism in this category. I don't see DELL going there any time soon. I think DELL's plan is to intersect that product space in 2001 with 64 bit Intel-based machines. So I don't think this applies to DELL at all yet. 2)Cost of Sales for Compaq is way up at +48% from a year ago. This probably reflects the disarray in the CPQ field over the mix of products, and maybe also the big "contra-revenue" we have heard about related to PII inventory in January and early February. This of course is one of the key differences between CPQ and DELL - DELL has no significant field sales force so they can change marketing strategy very quickly, and likewise no contra-revenue or channel inventory. 3)SG&A jumped a whopping +80% or so if I am not mistaken from a year ago. Obviously, the huge and bloated DEC structure was not cut quickly enough, both on the product side and the field side. 4)Gross margin eroded +2% from previous year. The key question here to me is whether this was primarily a result of a major shift in commercial PC profits (likely, and a strong statement for DELL) or from declining margins in the high end products (less likely to show up directly as a hit to GM). We definitely need a lot more info to sort this out but my suspicion is that sales of commercial PCs in the North American market were the big drag on CPQ performance. This squares with DELL's gains in exactly the same segment.