Geeze, I bought Compaq at $70 because it was considered a bargain and was pleased when it went to $79 , but since then it has gone down to $53 and is about 30% from its high while Dell is only about 15% from high. What is the DEAL here
The fact CPQ can sell an Intel 166Mhz MNX PC for $699 provides obvious proof that CPQ has been making plenty of money off their $799 even lower-cost Cyrix PC which they sold the lights out of during Christmas.
The stock drops every time CPQ cuts prices because the analysts haven't figured it out yet that CPQ's margins have only continued to go up despite the price cutting instead of down.
Dell will need to compete in this sub-$1,000 PC market, or their mid-range sales will be cannibalized, if that hasn't started yet already. If and when Dell ever does announce a sub $1,000 PC, Dell's stock will drop like a rock just like CPQ's did when its sales of sub-$1,000 PCs were perceived to be taking off in a major way this fall.
Yet if Dell doesn't offer a sub $1,000 PC, eventually they will find themselves shut out of over half the entire PC market. That's right, that's exactly where I see the PC industry going in 1998. Like it or not, by the end of 1998 over half the entire market will be in sub $1,000 PCs. And guess who is the first with the most in that market? CPQ, not Dell.
Prediction: First home computers, then business PCs. Dell can hide its head in the sand if it wants to on the sub $1,000 home PCs, but watch what will happen later on this year when the battle turns to business computers. Dell must answer the call sooner or later. The cheap PC isn't going away, it's taking over.
Sometime this year the steady erosion into Dell's sales will show up in the form of an earnings shortfall. Dell's high PE ratio is setting itself up for a hard fall when that happens.
As finanalyst states Dell has more to gain due to the recent Asian flu. Cpq. is invested in sales more heavily than DELL in Asia, am not sure about their components buying. #2 DELL did not sit on the sidelines when cpq./gateway came out with sub $1000 computers. There is a very informative article in the market news which may help explain how DELL chopped away 30 % of computer cost to be more than competitive with "the others". #3 Let's face it DELL is a LEXUS as compared w/cpq or gtwy. no matter what Fruit of the loom says ( think fruit of loom may be full of feces ).By the way DELLITES rejoice for we have traveled another 2 1/16 mile toward the land of splits and money.