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

To: rudedog who wrote (130822)	6/3/1999 10:03:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 176387

Agree with your comments on a hypothetical basis. However, Dell is gaining market share. It can't do that on price alone. It's offering a much better overall value package of PC, quality, support, service, Software, customization, customer interface, ... IMO, it's not just the direct ordering model. It's the overall business model. As long as the CPQ's and the IBM's think that they can implement a web site and take share back from DELL, Dell will remain a winner. As I've said before, IBM doesn't give up easily. And they do eventually learn from their mistakes. So I agree with you. Dell has to keep moving ahead to survive. FWIW, Ian.

To: rudedog who wrote (130822)	6/4/1999 12:35:00 AM
From: Meathead	Read Replies (1) \| Respond to of 176387

Re: they can go pretty far down on PC prices and still stay afloat. DELL can not. True, Dell can only go so far below cost for so long before they sink... but in a worst case scenario (a price war of the magnitude the industry has yet to see), Dell would not have to fully participate in a cut throat pricing environment so intense that they inflict quarterly losses. You can stay afloat forever as long as you don't lose money. I've done the math on these types of price war scenarios. Dell has many options to stay profitable even under the worst PC price war conditions. Revenues get hammered and Profits maybe slim to none but the plus side is PCs would no longer be 61% of revenue<g>. Example, IBM is still losing money on aggregate for every PC they sell (although they've shown improvement to close to break even). Dell makes about $300 per PC (desktop). But the end pricing (ASPs) to the user for the same technology is relatively the same. If IBM decided to lose an additional $300/box and Dell decided to match this by selling at cost, IBM would forfeit $2B annually from their $7B profit and Dell would break even (profit form other HW categories cover OPEX). Dell does not have to engage in further price competition and risk quarterly losses. Dell could start to sacrifice market share if IBM decided to inflict worse damage on themselves and the industry. However, if IBM wants to sacrifice 3-4B per year to really eat into Dell's market share, they could do it. They could conceivably spend tens of billions to eventually put Dell out of business and ruin their own for many years in the process. However, with the PC being a smaller portion of these company's revenue, where is the incentive to wage intensive PC price wars subsidised by higher end products? Their isn't one. The losses would be catastrophic, shareholders revolt, CEO's fired. Better to slowly disengage. Also, you can't have this kind of war without affecting all hardware categories so the losses to the industry would be devastating. That's why a "let's get together and put Dell out of business coup" hasn't happened yet and it most likely won't. MEATHEAD