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March 17, 1999

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Subject: Re: Forbes on Dell
Author: AcesWild

RE: "Forbes" on DELL & PC Sales Chart

--the only comment I'll make is that I agree that PC sales are accelerating in one particular demographic area -- people what are wanting to 'me too' overnight on the Internet, the web, to have an e-mail address, etc. -- the people who we all know want starter PCs and low-end, bare-bones systems.

The chart (if accurate and not distorted -- god knows it's easy to manipulate charts, e.g., in their scope, in order to distort them and make them show what you want) shows DELL's growth as steady and straight (what? No dip or drop?), but as competitors' sales are accelerating in the end of the period shown.

I haven't got the time to really scrutinize the chart, but would liken this a little to another industry or two with which I'm familiar:

Suppose DELL were in the business of selling cameras for motion pictures and television, an industry predominantly utilizing *high-end* cameras for national and international box-office release or broadcast transmission. Suddenly, at some point in the history of home movies and home videos, there's enough interest to market cameras to mass-demographics of low-end users -- this represents a price breakthrough.

As a film student, the lease-expensive *used* 16mm sync-sound camera 20 years old might be valued at $25,000. At that same time, families could buy an 8mm, mass-marketed home-movie camera for a few hundred or less. The last time I was on a professional movie shoot --

[Digression -- an Aces anecdote: -- while the skeleton film crew, Martin Sheen, Alan Arkin, et al., got a Sunday off at Death Valley resort, I worked with a mule-team and their wrangler schlepping the very heavy camera gear back into the Dunes for shooting the following day. Yet another guy with us would be sleeping with the gear overnight, as a guard (envied him less than my own gruelling duties). I remember we were loping along, me walking, the wrangler on a mule, when the subject of what the gear was worth came up. There were metal cases strapped onto the mules, balanced from side to side, etc., one for the Panaflex 35mm camera, and approximately one for each separate lens. I pointed to the camera unit and said, "Well, you don't even buy a Panavision camera outright -- you lease it. But the camera, that one box alone, is insured for $1/4 million, and that's without the lenses." His jaw dropped visibly and he said, "You gotta be s--tting me!" I thought he was gonna fall off his mule.]

--so we can see that 35mm movies are not about be shot in sync-sound any time soon for Mom 'n' Pop to memorialize Jr.'s birthday. Nor will we see the less-expensive 16mm. Aside from the grainy scratchy stuff that might be acceptable on "Funniest.." or an amateur capturing a news event, you won't ever see 8mm, either, for broadcast transmission. (Over the years, 2" video gave way to 1", and news crews went to 3/4" tape, etc., but there's still a wide disparity between what's deemed broadcast quality video and the 8, or High 8 I believe is still std. home video.)

HOWEVER: Like 8mm film and high-8 video, the Internet explosion has created a new demand, a new market and a new demographic. Like the inexpensive cameras for home use, mass-marketization has created a market for low-end usage.

Just as Panavision and the makers of studio quality video cameras are not about to be put out of business by the home market, neither will nor should DELL suffer over the sub-$1K, web boxes or WebTV. In fact, DELL can supply these markets, should it prove profitable.

Depending on whether (and exactly what consititues an official "PC", as included on the Forbes chart) DELL decides to involve itself in that market, what competitor can manufacture those units faster or cheaper than DELL?

I submit: "None."

--Aces

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