One of the World's Greatest Trends Is Squeezing Dell and HP

One of the most striking aspects of the 2014 International CES was its breadth and scope, offering a look at the astounding scale of "white label" devices. It shows just how low the low-end tech industry is able to go in pursuit of a broader market.

What does it mean for large-cap computer and device makers? Motley Fool analysts Eric Bleeker and Rex Moore offer their insights from the floor of the world's largest consumer electronics show.

A full transcript follows the video.

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Rex Moore: Let's wrap it up with one last thing now as you've really looked across the floor, and you have a few thoughts about the future of technology.

Eric Bleeker: One of the areas... when you're reading about smartphones and tablets, you see these mind-blowing numbers. I believe smartphones could hit a billion units sold this year.

What you don't get a good feel for, especially if you're an investor in America, is where these billions are coming from, because you go out to Verizon and you buy your iPhone, but the people buying that billionth new phone aren't buying iPhones.

What you get to see is especially -- we call it "white label" -- just components that look almost essentially like iPads or iPad Minis, and they are extremely capable devices. I've seen tablets that I'm sure could perform admirably in most use situations selling for $30.

What I find fascinating about this is, when you looked at the PC in the '90s, you'd pay thousands of dollars -- a few thousand dollars -- for a top-line PC. The PC cost curve has really only gone down to maybe $500 before kind of plateauing.

The smartphone cost curve, and the tablet cost curve, is so incredible. It started at $600-$700, but it's moved all the way down, incrementally, to $30. We saw a fantastic stat the other day from Ericsson's (NASDAQ: ERIC  ) CEO that, for every $10 you can take off the price of a phone, you will reach 100 million new consumers.

At the end of the day, it's really showing that we focus on this top-end innovation, but this ability of companies to make things cheaper and smaller, and be able to reach these consumers, is really one of the greatest trends in the world. It might be painful to companies like a Dell  (NASDAQ: DELL  ) or an HP (NYSE: HPQ  )  that are getting their margins crushed, but it's inescapable.

It's a fact of hardware life, and the pace and the scale; when you actually see it up close at an event like this, it's just truly awe-inspiring.

Moore: Yeah, I was blown away. Thanks, Eric. I appreciate it. Great insights for investors. 


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  • Report this Comment On January 23, 2014, at 7:56 AM, gsagi wrote:

    "I've seen tablets that I'm sure could perform admirably in most use situations selling for $30." Some petty good reefer was passed around at CES...

  • Report this Comment On January 23, 2014, at 8:02 AM, gsagi wrote:

    apologies, I forgot to add: Apple, too, is doomed by the $30 tablets.

    Racing to the bottom with razor thin margins is NOT a sustainable trend anywhere. That is exactly how Dell and HP ended up with building cheap boxes while Microsoft was sitting pretty collecting for the OS. Google may end up collapsing as fewer trust them with their data, the ad business drying up may put an end to free Droid...

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