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>Dell -- Another one with great numbers. But, again
>the low gross margins and the competitive nature of
>their business scared me away a bit. I think that
>these factors require this one to be watched a little
>more closely than the typical CK.

Dell is a healthy, efficient, growing company, with the management team responsible for its success still at the helm. It's still innovating (pushing farther into the internet), and hiring like mad here in Austin.

Dell introduced a new business model, and everyone else in the industry (even IBM!) has been playing catch-up. Dell has pioneered online sales, actually making money off of this "e-commerce" stuff while everybody else was still just talking about it. If, by some stretch of the imagination they saturated the computer market, they could sell other products through their web site.

Dell has the same basic business model as Wal-Mart and Home Depot: sell what the customer wants, as rapidly as possible, in bulk, with low inventory and overhead. Dell took the wal-mart model and applied it to small high-value items, with a legitimate service component (integration and configuration into working computer systems) so they actually add value (and a brand name) to what they sell. Add to that the fact that the market for computers is one of the fastest growing markets there IS right now, and they're EXTREMELY well positioned.

Everybody has competition (even Coke), but the game is Dell's to lose at the moment. Dell has chased Compaq away from the high-end (high margin) server systems. If you think DELL has low margins, how do you expect Compaq to SURVIVE? Compaq is focusing on the cheapest of the cheap, selling systems with almost NO profit margin, to people who have never bought a computer before (can we say tech support costs?) And there's no company but Compaq even challenging Dell for the #1 spot.

I personally think the long-term risk/reward here is fairly nice. This is a growing market market niche that has never really been particularly exclusive. There are still many large players (Dell, Compaq, Gateway, IBM, HP). The only company threatening to put anybody else out of business is, in fact, Dell.

- Oak
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