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Hi All:
When I mentioned Dell in my hard drive post, it was an afterthought. I
was not making any recommendations. I was just expressing my opinion.
I am a computer consultant/reseller since 1984. I read several weekly
trade publications that are specific to the computer industry. Dell is
of interest to me since they are a direct marketer. I have known about
Dell since Michael Dell sold grey market computers from his dorm room at
the U of Texas. I have watched the company for years and have to admit
that Dell has done well for himself, even survived the mess-ups when his
company was trying to make their own motherboards with limited success
and numerous bugs in the late 1980s.
For the last two months, the publications have been reporting the new
strategy that HP, IBM and Compaq are constructing to go after direct
marketers. The strategy is channel assembly - build to order computers
as opposed to projecting demand and pre-building. There will be no
mistakes to absorbed with this model. The customer wants and the
customer gets. When they do this, coupled with their strong support
network, they will have eliminated the price point advantage that Dell
has maintained. It was reported that Compaq recently beat out Dell for a
large contract in a major company that Dell had previously supplied. I
expect to see more of this when channel assembly kicks in next month.
The publications have also been reporting a drop off in demand for
computers. This demand drop off is not entirely related to Asia.
I would not make a recommendation on a course of action to take for
anyone but myself. Stock price is subjective in the Tech industry. Dell
could be up there for a while. They have great PR and much free air
time. They also spend a fortune on advertising. All this boosts stock
prices I've noticed.
According to the trade editorials, now that the second tier vendors such
as AST are going down the tubes, (you'd be surprised who else is
hurting) the big guys are going after the directs. One direct is already
in trouble due to lower volume, buying a channel computer company and
then alienating its resellers including me.
I read a great deal of material and mentally file away trends that are
important to me. I apologize that I don't have the figures here in front
of me. I was just stating an opinion based on what I have been reading
and seeing in the industry. You'll be hearing the figures from the
general sources I anticipate by April.
The tech sector is something I know a little about. I have to buy
equipment frequently. Deflation has been hitting strongly. For example,
Canon introduced a printer for 499.00 msp last August, the same printer
today has a msp of 299.00. I've watched hard drive prices plunge and
drive companies go out or be absorbed. Computer companies have been
dropping too. It is a mess. I don't know what else to say. I took some
short positions at the beginning of this year and they are paying off
now. Took a while as the stock purchasing public does not really get the
whole story on Tech from traditional sources. By the time those sources
start talking it is too late.
In summary, Dell is a direct marketer, the heavyweights of the industry
have targeted them for the first time on a price basis. They have
advantages that Dell doesn't; e.g. resellers that back them up. Draw
your own conclusions as to where this will lead.
If anyone is interested, I'll post any developments in the channel
verses direct situation.
Sincerely,
Robert
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