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March 23, 1999

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Subject: Re: Dell & Quality
Author: Eman2

Blax writes: I wouldn't buy CPQ computer either, I wouldnt buy an IBM PC either. I know I can put a computer together myself and get exactly what I want at a better price.

I put my computers together too, but not so much for the better price but more so for the fact you get specifically what you want (ie. more selection from different parts from different manufacturers). I really disagree that you can build a similar computer (component wise) as a Dell for a cheaper price. You may be able to buy different cards, or motherboards because you like one brand over one of the one Dell offers, but if you purchase the same cards, motherboards, chips, monitors, etc that Dell uses, I don't imagine you will beat the price significantly for the time and effort it will take you to construct the computer.

Also, I think if you are going to purchase a computer from one of the list of box makers, you will have a much greater selection of different components that are used to make the box if you buy a Dell. Some of the other companies are trying to copy Dell's direct model, and are gaining on them (particularly Gateway). However, Dell has been in the direct game longer, and I believe not resting on their arses but actively pursuing solutions to coming challenges.

I think you are neglecting to see the true advantage that Dell has over other box makers. The fact that they have been selling made to order computers, servers or whatever they produce longer than the others has allowed them to gain a significant advantage regarding price (both components they have to purchase and end product price to the consumer). The price advantage they have gained stems from the fact they do not have to keep large inventories of particular products on the shelves as long as the other box makers. Lowering of component prices (your example of RAM) is more easily introduced into new Dell boxes because their computers are moved off the shelves faster (made to the customers specifications). This lowering of component prices is easily transfered to a lowering of the whole box itself.

The other advantage that Dell has is in their selling only the high end products. They are concerned more with selling to the large companies or huge contracts versus selling to you and I. I don't see Ford and other companies starting up new divisions to build their own computers anytime soon because they can build them cheaper than Dell or other box makers.......

You also talk about perception and how it relates to investors reactions. I think investors are reacting to the recent play on Compaq's garbage earnings estimates by the ANALists in that the whole PC sector is slowing down and therefore all the box makers have been taking a hit recently. When Gateway and Dell report earnings for the 1st quarter of this year, I think we will see a change in the average investors reaction. Compaq will probably even start to move up (even though they shouldn't) with their crappy earnings release.

I have bought and held Dell for the last several years because of the reasons I have stated above. Not because they have split so many times a year or because the stock value has increased by X%. I think if you would do the research you would see the reason it has split so many times and has increased by X% is that it is an excellent company.

Enjoy your Compaq stock, I will enjoy my Dell....

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