Conference 7.286::digital

3378.0. "Yeah! BEAT GATEWAY 2K" by POWDML::SOBELL () Fri Sep 09 1994 18:29

HOORAY FOR THE  HEADLINES!
     DIGITAL TOPS GATEWAY 2000 IN WORLD WIDE PC SHIPMENTS
          (  Digital Today  8/22/94 )

     "  Digital's PC business has reached a milestone, breaking the ranks of the
     top 10 PC vendors world wide for Q2 of the calendar year.."




THINGS THAT MOTHER DIGITAL NEVER TOLD YOU.....

     1)  Exactly how many DID Digital Ship?

          Digital is silent about providing quantitative information.  At best
          you can come up with is a nebulous number of 480,000 units shipped in
          two quarters - Q3 & Q4.   Other announcements by vice presidents talk
          strictly in terms of  percentages.
          

     2)  Well what did Gateway ship?
          Gateway proudly announces specifics on their shipments in their
          quareterly financial announcement.   In Q4,  "more than 236,000 PCs
          ..." were shipped.


THE DIFFERENCE BETWEEN LITERAL TRUTH AND  THE WHOLE TRUTH.

So maybe we can take it on faith that Digital and Gateway are close.  Suppose
that we examine the data.  What would we find?

     3)  Digital is claiming WORLD WIDE SHIPMENTS while Gateway focuses almost
     entirely on the US / North American Market.    Digital is selling in
     markets that Gateway is not a player. Gateway explicitly states that only
     6% of it�s revenues come from Europe.  Digital's is FAR higher.

     An honest comparison would say....

                    Rough Estimates for .....
               North American Market         Rest of World  Total
               ---------------------    -------------- ---------------- 

     Digital
          Assume         60%             40%?          split

          Assume    the  Q3 / Q4 skew was  40% / 60%

          Estimate       173,000               115,000     = 288,000 Q4

     Gateway             222,000                14,000    = 236,000 Q4
                          94%                      6%

     So OF COURSE, Digital surpasses Gateway -  in world Wide Shipments!
     However Digital is still catching up in the same market that Gateway is the
     major player.  Performance is very good in the US, but the words that
     DIGITAL SURPASSES GATEWAY... sound so much better than DIGITAL SELLING at
     80% of the units Gateway shipping.
     
     

4)  GROSS MARGINS = WHERE THE RUBBER MEETS THE ROAD.

     Lets Compare Public Financial Statements:

                     		Apr-June                Jan - June
                      	  	 1994               	  1994
                                 	 % of Sales
            DIGITAL
     Gross Mar - Products         25%             	28%
              SG&A    		  23%                 	26%
                   Posted Net Operating Loss for Quarter and 6 Months!

            GATEWAY
          Gross Mar    		  9%                 11%
               SG&A    		  8%                  8%
                    Posted Profits in both Quarters !!

     So what is going on here?   Digitals Gross margin on total products is
     three times Gateways.  Gateway is turning a profit and Digital is loosing
     money.   Digital and Gateway are equivalent number of units.    The key
     difference is  the fixed overhead costs.

     The cost structure at Digital is clearly too high to support even large
     numbers of  shipments.  High costs of  goods sold are not yet making up for
     the  very high overhead expenses.  Fixed costs that are   8%  of sales is
     truly bare bones.  In comparision, Digital's 20-25% is fat city even
     without the added R&D expenses.
     
     Now, here's where the rubber meets the road.  Gateway STILL MADE after tax
     profit $3.7 for the quarter  WITH 9%  Gross Margins.  Even more ASTONISHING
     is the profit is after extraordinary write downs  consisting of :
     
          - $ 16.5m  for Inventory write downs and reserves
          -  $ 3.8m  for Reserve for doubtful accounts
          -  $ 4.4m  new warranty reserve program - now 3 year warranty

     If Gateway did not take these additional charges in the quarter, there
     would have been and ADDITIONAL $24.7m income put back on their bottom line!


HIGH VOLUME SHIPMENTS ARE CRITICAL TO ACHIEVING BREAK EVEN
     The good news is Digitals high volume strategy is a critical success
     factor.   The result is  we are growing much greater than the market as a
     whole.   The US market, measured in shipments,  grew 23% year over year -
     April, May, June.


The bad news:
     Our current cost structure is STILL not competitive for this market.  In
     contrast,  smaller firms including  Gateway are optimized for this type of
     market.
     
     
SIT-DOWN FOR THE *REAL* BAD NEWS.
     We have identified that SG&A 8% of revenue is now Best in Class.  I applaud
     Digital's intentions to strive for Best In Class.  However the 8% and 10%
     Gross margin numbers are stale, stationary numbers in real world of
     dynamic price changes.  For the past year, PC manufacturers have engaged in
     a price war to gain market share.  In fact, at the end of  August, both IBM
     and Compaq announced large price reductions in the 25% range.   In turn,
     Digital was forced to follow suit.   The short term result places
     exceptional  pressure on the old standard gross margin levels.    Over
     night, margins deteriorate.   Variable production costs are tied to unit
     volume, not pricing schemes.  As a result there are less gross margin
     dollars left to cover the semi fixed high SG&A levels.   Over night the old
     best in class target becomes obsolete and so too the internal organization
     plans geared toward achiving immobile targets.
     
     
     
THE LESSON FOR THE DAY:
     Never aim at today's benchmarks.  Without a sustainable competitive
     advantage that establishes you in the forefront of today's standards,  you
     will be doomed.
     
     
WERE TO GO FROM HERE -

1)  FIRST - LOOK AT UNBIASED FACTS.

     What are we going to do, right now, to exceed the benchmarks?  I submit,
     the first thing is to look at the real issue.  Lets not fool ourselves with
     warm fuzzy myopic facts that belie the thin ice below.

     This is how the competition stacks up.  Dataquest reports PC shipments in
     the U.S. during the 2nd quarter were up 23% from the year-earlier period,
     indicating  that the industry did not slow down as had been anticipated.

     USA  Market Shares - Units shipped April through June,  
	{ Wall St Journal  8/16/94) }

          1) Compaq       14.3% share   595,000 PCs
          2) Apple        11.2% share,  465,000
          sales slowed in the quarter because it began shifting its product line
          to a new  microprocessor, the PowerPC.

          3)  Packard Bell      9.3%,        387,000
          4)  IBM          	7.0%.        329,000.
          hurt by sluggish sales overall and shortages of notebook computers
          with color screens.

     Now Compare the competitors in the worldwide Market  in the same Quarter:
          1) Compaq                1,200,000
          2) IBM                     850,000
          3) Apple                   845,000
                                   ------------
                    Top 3          2,895,000

                    Digital @         288,000 ??


 2)  ESTABLISH  AN  ACHIEVABLE TARGETS  -  KNOW YOUR COMPETITION -


STRATEGIC ADVANTAGES:

There are several dimensions that a firm must focus in order to gain and
maintain competative advantage in this market.  Both dimensions depend on gross
margins.   The first dimension is the firms ability to produce a product at the
lowest possible cost.  Higher gross margins indicate low costs of production
and provide the necessary profitabiliyt to support the fixed costs of overhead.
Second,  high gross margins are the critical factor allowing a firm to quickly
react to competitors  inevitable price reductions.  The importance of a high
margin acts as a short term insulating buffer against deficts when the firm is
forced to match competitors price reductions.

In short gross margins are indicatiors of  competitiors ability to withstand
tactical price reductions without incurring deficits.   The following table
shows a small  sampling of Digitals PC competition.

Gross Margins for PC business:

     #1) Apple      	 26.7%     The leader in PC manufacturers
     #2) Compaq          26.5


     Dell           	  21%
     IBM   High teens to low 20's


     ALR            13        Competitiors with weaker and mediocre  resources
     AST            14   to withstand further price reductions.
     Zeos           10
     Gateway 2000    9

There  is a strong correlation between high gross margins and the ability to
maintain or improved market shares.   Fixed costs are covered by gross profits
in the manufacturing process.  Tactical price reductions on PCs show up as one
for one reductions in gross margins,  leaving  lower profit margins available to
cover fixed costs.   The only way a manufacturer can maintain the same level
margin dollars in the face of lower revenue per unit shipped is increase the
number of  units sold.   Thus when a firm lowers prices across the board 10%,
unit  volume must instantly  increase   110% .   Clearly, those firms that do
not compensate volume for price reductions,  expose lower profit margins and
ulitmately bottom line losses.   Firms with high gross margins can weather the
storm longer than low margin firms  because of the available buffer to pay for
fixed costs.




The implication is to analyze the effect of recent price reductions and compare
required increases in unit volume shipments in order to just maintain
profitability in the absense of  price wars.   Within the past month, several
firms annouced significanlty large reductions in prices.

Other Recent Price reductions within the past month:

     IBM                      		27%
     NEC -Image desktop line            24

     DEC - 486 and Pentium              26%


Assuming all competitiors are required to follow suit and lower their prices by
25% as well, it is possible to calculate what the minimum amount of incremental
shipments necessary to maintain the same dollar gross margins.


     Total US Market Shipments -  April - June 1994  =  4,160k

          US.
          Market Share - Pre price reductions          New Shipment & Market
									Share
   ----------------------------------------     Increased 
                                             	Shipment	New B/Even 
								Mkt Share

     1) Compaq       14.3% share   595,000 PCs  +149,000 ---->17.9% share
     2) Apple        11.2% share,  465,000      +116,000 ---> 14.0%
     3)  Packard Bell 9.3%,        387,000     +  97,000 -->  11.6%
     4)  IBM          7.0%.        329,000.      +82,000 -->   8.8%

     Digital          5.3%         173,000       +43,000 -->   6.6%

The chart is a sensitivity test for shipment and market share requirements in
the face of  increased pricing pressure.    It shows that all  the firms must
work ever harder and increase significant amounts of market share, just to
maintain the status quo of gross margin dollars.   The combined market share for
the top four US competitors  would conceptually  increase  10.5% ( 41.8%   to
52.3% share )   in the face of Digitals 1.3% increase.   From this point of
view,  Digital gains a greater share of the pie, but not at the expense of the
large competitors.   In the face of this model disparity, it quantifies the
difficulty Digital  has to reach its stated objective to be the fifth largest PC
supplier by the end of the year!

The world is not so perfect.  Not all competitiors will achive these market
share gains.  Some will over achieve while others will lag.   Comparing current
gross margins against relative market shares,  provides a unique insight as to
which firms are more insulated from the hazzard of not achieving  the minimal
increase in market share.

	                    Share          Margin

     High Shares  / High Margins Group

     1)   Compaq         	14%       27%
     2)   Apple          	12%       27%
     3)   Packard Bell        	 9%          ?
     4)    IBM      		7%        20% ?


     Low Share  /  High - Mediocre margins
         Digital         5%         teens to 20% ??

     Low Shares   /  Low Margins

     ALR                      13
     AST                      14
     Zeos                     10
     Gateway 2000              9



3)  SELECT YOUR  FIELD OF  BATTLE  ONLY AFTER ESTABLISHING STRATEGIC ADVANTAGE

     I have demonstrated  how major PC vendors market share changes dramatically
     when using different geographic measures.  The most outstanding example is
     IBM.  It is number two in world market but four in the US market.

     If my assumptions are merely in the ballpark for Digital's Q4 shipments,
     then our calculated market share of the US Market ( apprx  4,160k shipments
     Q4 ) , derived from public sources is just 4.2%  compared with Gateway's
     5.3%   This deduction shows we are a small player with a very long way to
     go.  The good news is we are rapidly capturing market share.
     
     High share / high margin companies are in the drivers seat.  They command
     the market lead as well as have the insulating factor derived from gross
     margins.  Look for them to set the pace.    Low share, low margin companies
     find themselves playing the last of their cards.   It should be easier for
     them to increase the number of units since the minimal target number is
     substantially lower than for the top four.  However, there is very large
     risk that volume will not over come the 25% across the board price
     reductions.   Without substituting equivalent increase in volume to offset
     price reductions,  the result is the elimination of all existing gross
     margins.
     
     Digitals competitive position is a cross between the two extremes.   Much
     depends on the actual, unpublished  gross margins.   Digitals low share
     does not afford the ability to effectively take the lead in preditory
     pricing.  As a result, Digital will be a price follower.   At the same
     time, there may be enough in the products to afford a short insulating
     factor from delays in ramping up shipments.    The best strategic play for
     Digital is to focus on capturing incremental share from the weaker players
     as they fall away rather than target the big four on their terms and market
     segments.



==========================================================

SOURCES OF INFORMATION:

DEC revamps its PC unit, taps vets to attack market
From PC Week for August 15, 1994 by Michael R. Zimmerman

     PCBU Vice President and General Manager Bernhard Auer ... The division is
     making progress: For the first six months of 1994, PCBU took in more than
     $900 million in sales and shipped about 480,000 units, compared with sales
     of about $1 billion and shipments of 500,000 systems for all of 1993.

     *****************************************************

Market researchers at Dataquest Inc. estimate Digital shipped 494,000 PCs in
1993 and predict 1994 sales could approach a million units.


===================================

29-Jul-94

GATEWAY 2000 ANNOUNCES SECOND QUARTER PROFIT AND RECORD REVENUES

NORTH SIOUX CITY, S.D., July 28 /PRNewswire/ -- Gateway 2000, Inc., (Nasdaq:
GATE) the leading direct marketer of personal computers in the United States,
today reported shipments of more than 236,000 PCs and record revenues of more
than $616.5 million, up 69 percent ......

During the second quarter, Pentium-based PCs accounted for about 26 percent of
total units shipped, up from approximately 17% in the first quarter of 1994.
And desktop PCs accounted for 92 percent of total units shipped. European growth
continued with sales growing to $34 million, a 6.3 percent increase from the
first quarter.  The European operation achieved an operating profit in the
second quarter before the effect of inventory related charges.




                         GATEWAY 2000, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
     (dollars in thousands, except share and per share amounts)

	   Three months                Six months
          ended                 	  ended
       	June 30,                	June 30,

              	1994   	     1993         1994     1993

 Net sales 	$616,530   $364,734  	$1,232,455 $785,757

 Cost of goods sold
		560,641    311,684	1,092,027    662,016
  Gross  profit
		55,889	    53,050   	140,428        123,741
               9.1% 	      14.5%       11.4%   	15.7%

  Selling,  general  and  admin
               50,981	24,418      	 98,728  	55,922

   Operating  income
		4,908      28,632  	41,700     	67,819

  Other, net   1,102   	      680       4,012   	1,661

   Income before actual and pro forma tax provision
              6,010	   29,312      45,712  		69,480

  Actual and pro forma tax  provision
        (1)   2,250	   10,300      16,600  		24,400

 Net income(1) $3,760	   $19,012  	$29,112 	$45,080

  Net income  per share
          (1) $0.05 	    $0.27       $0.37   	$0.64

  Weighted average  shares  outstanding
         78,454,632   70,388,906	78,648,362	70,050,131

(1)  The Company was an S Corporation until December 12, 1993.  The
     financial statements for periods prior to this date reflect a
     pro forma provision for taxes.  Net income and net income per
     share for such periods reflect the effects of the pro forma
     tax provision.




                          

    Absolutely wonderful analysis.
    
    

    
    	I agree; however, what is the point you are striving for?
    
    	Do we need to layoff more people to get SG&A in line with Gateway?
    
    	Or should we be focusing on new markets and pricepoints?
    
    
    
    
    	Nice anaylsis, but as Clara used to pronounce "Where's the beef?"
    
    
    		the Greyhawk
    
    

	re: "Where's the beef?"  - my sentiments exactly.

	Whilst I am the first to appreciate a well
	reasoned analysis backed up by quantitative
	evidence, I am also the very first to demand
	a concise management summary.

	What recommendations are to be made?  What is
	the 30-second elevator pitch that we might
	derive from this analysis?

Thanks,
Chris.

    One more for: "the best referees sit on the benches" or "the best
    captains stand on the shore" etc. Why not tell Pesatori all this
    wonderfull stuff and see how fast how will offer you a job?
    
    Al
    

>	re: "Where's the beef?"  - my sentiments exactly.

    The beef is: go eat chicken.
    
>	Whilst I am the first to appreciate a well
>	reasoned analysis backed up by quantitative
>	evidence, I am also the very first to demand
>	a concise management summary.

    Management summary? I though managers weren't supposed to be
    reading this conference? :-)
    
>	What recommendations are to be made?  What is
>	the 30-second elevator pitch that we might
>	derive from this analysis?

    The elevator pitch is: Go Eat Chickens and .0 states this
    at the end of his/her IMO excellent (but perhaps not very concise)
    analysis:
    
    "The best strategic play for Digital is to focus on capturing
    incremental share from the weaker players as they fall away
    rather than target the big four on their terms and market segments".
                         
    .0 quanitifes what "strong" and "weak" is through the concepts of
    market share and gross margin. (S)He even identifies the chickens
    we should be eating: AST, ALR, Zeos and GateWay (rule: establish
    achievable markets - know your competition)
    
    Secondly, .0 indicates that Digital is being forced to play
    according to the big 4 rules (pricing etc) and our (default?)
    strategy is to try to play catchup to the big four and implicitly
    asks if this is the right strategy (rule: select your field of
    battle only after estalishing strategic advantage).
    
    Finally, Digital for all its chest-thumping is still playing in kiddie
    garden wrt market share (rule: look at the unbiased facts) and
    when it tries to target the bigger players then the real rubber
    will hit the road and Digital will need to have a credible story
    why it can pull through on lower market/lower margin starting point.
    
    Pesatori would do well to offer .0 a job (but send him/her on a 
    writing course first :-)
    
    re roelof
    	 

    
    	Roelof -
    
    		The Chickens you are referring to are all PC assemblers
    with minor (as in very) Engineering added-value in their products. They
    basically test components prior to developing their BOM and then buy
    whatever is available to meet demand in assembly. While this may be a
    profitable endeavor in a growing market, it is a going-out-of-business
    strategy when markets stablize, or contract.
    		Digital is an Engineering/Manufacturing company. We need to
    differenciate to be successful (the 2100-series is a good example). My
    contention after reading the basenoter's analysis was, and still is,
    what is the point?
    
    		We are not going to differenciate chasing COMPAQ or IBM. We
    need to aim at market requirements for things like "the absolute
    easiest to use", or "Fire it up and Internet your brains out". Each of
    these appeals to a specific market (home use and educational markets)
    that will pay a slight premium for hitting the targets. A slight
    premium is the 4-8% range uplift against the mean market price of the
    market leader in that segment.
    
    		The fact that we have excess overhead is irrevelant because
    we are talking PCs here and not VAXs, Alphas, etc. It is an apples to
    oranges comparison at all the financial points and .0 analysis breaks
    down rather dramatically at that point. Gateway don't make minis. Or
    sell them either.
    
    		If we is to eat chickens then .0 would be better advised to
    focus on Zeos, etc. Otherwise "Where's the beef?"
    
    			the Greyhawk 

    My two cents:
    
    a) Digital must become a high volume - low cost producer; not doing so 
       will only be trouble down the road.  Not being a low cost producer
       will make it extremely difficult for the company to do proactive
       things (innovate) because the funding will not be there, or to react
       quickly to a competitor's action(s).
    
    b) I agree with .6 to the extent that we have got to figure out how
       to differentiate our products.  (Actually, it's interesting to see
       the Greyhawk agree with me! :-))
    
    c) We absolutely have got to figure out how to be better with 
       time-to-market issues!  The 2100 Server is a great product, but we
       still can't sell it with NT - it's still in field test.  Our 
       competitors have had Intel SMP Servers out for at least a year. 
       This is killing us!  (I still don't understand why we didn't lead
       with an Intel SMP server - at least we would have a product to
       sell!)
    
    Great effort on the base noter's part.  If he had access to the PCBU's
    books he would have done a much more accurate analysis.  I only hope
    the PCBU managers are capable of doing this, and in fact do it
    regularly!

We've had an Intel SMP server for years, the oddly named "ApplicationDEC 433MP".
It ran SCO UNIX.

				Steve

    re .8
    
    Sorry, I should have been specific; an Intel SMP server that can run
    Windows NT.
    
    Thanks for the correction.

>    We are not going to differenciate chasing COMPAQ or IBM. We
>    need to aim at market requirements for things like "the absolute
>    easiest to use", or "Fire it up and Internet your brains out". Each of
 
    I think we're very much in agreement, Greyhawk. Business rule #1
    is differentiate. As yet I have seen no concerted efforts to
    differentiate either through external advertising campaigns or
    through internal strategy statements so I'm pretty sure that
    Joe Bloggs hasn't either. In fact the _only_ statement I have
    seen up to now is "we want to be a big player".
    
    I'm second guessing .0 here (who is wisely lying low while the
    feathers fly :-) but assuming that Digital can't or won't
    differentiate then the strategy he proposes appears to be the best.
       
>    The fact that we have excess overhead is irrevelant because
>    we are talking PCs here and not VAXs, Alphas, etc. It is an apples to
>    oranges comparison at all the financial points and .0 analysis breaks
>    down rather dramatically at that point. Gateway don't make minis. Or
>    sell them either.
 
    It is irrelevant only if there is no crossover of overhead and
    indeed business practices from other divisions to the PC
    division _and_ that there is no non-divisonal related corporate
    presence (i.e. payroll). I am not (yet) prepared to believe
    count #1 and I know count #2 is not the case. Put more simply,
    (engineering and administrative) practices developed for mini's
    may have derivates in the PC engineering group. This may lead
    to a better (more reliable) product but it may also lead to a
    more expensive product. I don't know. And as long as the division
    has to share managerial, administrative or whatever costs that are
    non-PC related then of course it runs at a (perhaps slight)
    disadvantage.
    
    Now Digital could conceivably differentiate itself on the fact
    that it makes minis ("The guys who really invented reliable computing
    in small packages" or some such) and hence charge premium. But for 
    various reasons it doesn't. 
    
    Summarising, the PC division _may_ be incurring extra overhead
    because it likely imported a number of business practices that
    were originally tuned to minicomputers, but this is pure speculation
    on my part and no more. What is certain is that the PC division
    is _not_ attempting to leverage (from a differentiation point
    of view) off of this relationship. In fact, my impression is that
    the division is taking pains to position itself as a fully
    independent subsidiary with little relationship to the rest
    of the company.
    
    re roelof  
    

    With regards to Digital taking share away from the lower volume/lower
    margin producers, you must consider: it is much easier for the high
    volume/high margin producers to target the weaker competitors to take
    share from rather than to target another high volume/high margin
    competitor.  It's only common sense!  That is why this is not an
    optimal strategy for providing longevity to the PCBU.  That is why
    Digital's PCBU must continue to focus on getting volume and margin up. 
    This has to be their primary objective.  Product differentiation and
    time to market are, albiet important, secondary objectives.
    
    When an industry shake out occurs, usually toward the end of a rapid
    growth stage, only the strongest survive.  That means high volume/high
    margin (Low cost) producers.  The only exception to the rule is if a
    company can identify a niche segment and differentiate its products
    early enough to dominate that segment.  An example of this would be
    Apple Computer, or Silicon Graphics.  However, in the world of Intel
    based dos/windows PCs, which have become so commoditized, it will be
    difficult for any vendor to differentiate to such an extent, barring
    some major technological innovation.

    recently read an analysis of DEC's position in the "market" (PC's
    particularly) which paraphrased, said:
    
    Our sales are improving (PC's, ALPHA, ETC) overall... releative to our
    own history.  But the market as a whole is inlarging faster, and as a
    result our market share is actually decreasing.  And since we are a
    small player in the overall PC market, we are constrained (by the sheer
    strength (or lack of) of numbers) to the role of "follower" in the
    market.  
    
    The reviewer did NOT have a rosy outlook for our future.
    
    tony

    
    In the PC space, the market is currently growing in the low 20% range. 
    This number seems to refer to revenue.  This implies that unit growth
    is higher by some x%.  ( Price / unit continues to decline ).
    
    Digital announced that it has doubled its PC growth.  I suspect this is
    measured by revenue rather than boxes.  I do not have access to
    internal information sources.
    
    Taken together,  the PC business is eating the lunch from some other
    players.  There is certainly a big enough descrepency between the 100%
    range and 20ish to make that statement.
    
    Assuming the author being quoted in  -.1,  then we must be loosing out
    in the other product markets.
    
    

    
    	While market share and margin (.11) are important, prospects
    *perception* of your differentiation is the most important aspect
    of success in a commodity marketplace. 
    
    	.10 makes some observations that bring to question Digital's
    internal accounting practices that impact *real* margin as it relates
    to the PCBU, but I personally regard that issue as secondary to being
    able to sustain volume and margin integrity during both price wars and
    overall market (by unit count) stabilization.
    	This is not a windy observation. In workstations, for example, the
    marketplace has stabilized at approximately 600,000 units annually for
    the past several years. Margins have held relatively intact as the
    players position themselves against Intel Pentium as opposed to each
    other. Your basic new technology competitor, if you will.
    
    	On the other hand, PCs have not reached their zenith in unit counts
    and therefore success can be measured differently. Being a follower is
    a bad strategy, we need to change the "rules of the game" if we are to
    gain significantly in this arena. I rest my case with my previous note.
    We have the talent to win (this thread alone proves THAT point), the
    real question is "Do we have the will?".
    
    		the Greyhawk

    Actually, I'm surprised no one has made the following point.  The fact
    that the PCBU's financials are hidden by the rest of the corporation
    can be an advantage.  Whereas DELL, Compaq, Gateway, etc., only produce
    PCs, their financial reports tell all, publicly!  Sure, you can try and
    surmise, as the author of .0 did, what the PCBU's cost structures are,
    but you could never be certain.  It would be a lot easier for us to
    zero in on them then it is for vise-versa!

    re: -1.....
    	the bad news is that no one in management probably knows what our
    	real cost structure is either!
    	/john

Well, having just called Desktop Direct asking for prices on the
new Celebris line, I think we're on the right track.  (So much so that I
placed my order for one.)

					Steve

    One last comment/question: so what exactly is so wrong with a global
    perspective any way?  Thinking globally happens to be a GOOD thing,
    especially in the era we are in.
    
    The last thing we need is to start thinking myopically, or to become
    xenophobic!

    
    The PC business people are not thinking just domestic.
    
    They are proud that their GLOBAL shipments put them over the top of a
    famous producer - Gateway.  Making direct comparision to Gateway makes
    one think that Gateway too is a global competitor like Digital.  The
    truth is they are not.
    
    A surface reading of the Digital paper made me shake my head with
    surprise and glee.  I was delighted at the progress.  Then I realized
    that this internal newspaper was really not comparing the same colored
    apples ( no not MacIntoshes either :-)]   As a result, it did not
    really tell the whole truth.   
    
    I am delighted Digital surpassed Gateway.  I am also glad Digital
    accesses the world market.  However, comparing World Wide shipments
    against a competitor that has limited its market to North America is
    akin to not picking on someone your own size.
    
    In summary, a better way to express the Whole Truth would be to write
    an article on Digital compared to another world wide competitor  or
    Digital's North American shipments against a North American competitor.
    
    Mixing the two gives a false sense of reality.. thats all
    
     

Well, this consumer looked very hard at the US domestic PC market and found
that for his needs and tastes, the best PC to buy is a Digital Celebris 590FP.
Even if I ignore the EPP discount, the price is extremely competitive with
the likes of Dell and Gateway 2000.  I expect the Celebris line to be
extremely popular.

						Steve

    re .19
    
    As you say, it all depends on how you look at things.  However, having
    global economies of scale along with global sourcing, distribution,
    sales, and marketing operations, is a lot better, overall, than just
    having a domestic operation.
    
    Strategically, this is goodness for Digital.

    RE: .19
    
    Gateway 2000 has its European Headquarters in Ireland, and is selling
    aggressively in Europe, particularly the UK.
    
    Laurie.

    Besides what difference does it make where you sell them as long as you
    sell more than the other guy?
    
    JW 8}