I think keeping the pricing at $199 and $99 for the upgrade is just right to move boxes. Since they cost virtually nothing to produce, the object is to move as many boxes as possible. One would think a savvy analyst would understand this. Windows Vista Premium for $299 turns any PC into a TiVO, so we'll see how they react. But the real market mover should be the fact that Vista needs more memory and better video cards, usually the tipping point that makes me buy a whole new PC.
Even if Dell Inc. (NASDAQ:DELL) isn't following my master plan (dump old PCs at fire sale prices and be ready to ship 20m new ones in Q1), I still have to believe they can close the 60% gap that has developed between them and Hewlett-Packard Co. (NYSE:HPQ)!
After having disappointed with slower growth, yada yada yada, someone may notice that Dell does still move $60b worth of boxes at a $4b profit. What if it's only $3b? Should the company be worth 20 times earnings? Because that would still make them 20% too cheap right now...
Goldman Sachs and UBS just downgraded them to a sell on the 18th, and analysts estimate that Dell will only earn $1.08 a share this year (and there are 29 of them covering the stock), with 21 rating the stock a sell or hold. I'm not going to say all analysts are idiots because I met one once who was chewing gum and holding a beer AT THE SAME TIME, so let's not underestimate these guys, but Dell did earn .33 in Q1 (.04 less than last year), and .22 in Q2 (.19 less than last year), which is .55 for the first half.
So the betting is that Dell, in the midst of a massive Windows release, is going to blow their 2nd consecutive quarter (last Q3 was .25), and blow the 4th Quarter by close to 30% (last Q4 was .43), in order to come down to that $1.08 number for the year. I doubt it. Dell messed up, they know they messed up and they are smart enough to fix it and well structured enough to fix it fast.
While I have faith, I don't have too much faith, so I am taking the DELL Jan '08 $27.50s for $1.60, which gives them more than a year (of new Vista shipments) to get back to where they were in 2003!