Uses its Muscle to Beat Side-Effects of Taiwan Quake
- October 15th, 1999
1999[Reuters] -- Dell Computer Corp. chairman Michael Dell said the company's
financial performance should not be affected by an earthquake that knocked out
industrial production in Taiwan last month. He said Taiwanese computer parts
plants damaged in the September 21 temblor quickly resumed production and Dell,
the world's second largest personal computer seller, had used its market muscle
to assure a steady stream of computer chips.
"In terms of
Q3 (third quarter) specifically, I think we're going to do okay...all of the
things we've seen so far seem to be addressable through supplier leverage,"
Dell said at a meeting with analysts. "We're going to squeeze out the little
guys, and I think we're going to get the parts we need," he said. "I feel very,
very good about the long-term environment and I don't think the short-term environment
is going to be one that has massive obstruction to our business."
earthquake has affected areas such as memory prices, the effect on the overall
market has not been as great as predicted. Dell's use of its size to get supply
concessions (a/k/a "squeezing out the little guys") is nothing new in the industry
the larger players just do not brag about it much. In this case, with PC competition
so fierce, the (smaller) players who cannot get their demand met will be hurt.
There will be market consolidation as some of the weaker vendors suffer over
the next six-nine months, and Dell Compaq, HP, IBM, and Gateway take advantage
of their market presence and clout.
gravitate to Dell, if they believe it is the only company responding in this
fashion. However, most customers will realize this is how the large vendors
operate, and not be moved by press releases.
see some short-term uptick in prices, until Taiwan production has fully recovered.
Users purchasing large quantities of memory may want to delay purchases a few
months until prices settle.
Dell's comments, we do not believe there will be any significant difference
in the effects felt by the major PC vendors (Dell, Compaq, et al.), so purchases
from the larger vendors need not be switched from one to another because of
For the longer
term, users should factor in vendor size and viability into their purchasing
decisions, in anticipation of similar natural occurrences.