Dell Axim X5 Profitable at $199?

[Ed Hansberry]

<a href="http://discussion.brighthand.com/showthread.php?s=37414e163b42e94ec5e3e418d516a98f&amp;postid=451469#post451469">http://discussion.brighthand.com/showthread.php?s=37414e163b42e94ec5e3e418d516a98f&amp;postid=451469#post451469</a><br /><br />According to a Brighthand thread, Todd Kort, a Gartner analyst often seen quoted in PDA market share reports, says Dell may be making a pretty penny off of the $199 and $299 Axim X5 models after the rebate, and a few pretty pennies off of those models sans the rebate.<br /><br />"According to a teardown report from Portelligent the total hardware and assembly costs on the 400MHz Axim are estimated at less than $150. Obviously, there are some additional software costs, probably about $20. Given Dell's low OPEX, (operating expenses) it is clear that they are making decent profits on the 400 MHz Axim, especially when people pay the full $349."<br /><br />For just $2,450, you too can read the report, available at <a href="http://www.portelligent.com/channels/pdas/Dell_Axim.asp">Portelligent</a>. Operators are standing by.

[Rob Borek]

I should get into writing trumped-up market analysis reports and charge $2500 for them... :lol:

[daninnj]

You kidding? I can buy 11 or 12 Axims for that!

DanInNJ

[Ed Hansberry]

That cost is unlikely and not a fair representation of the total product cost and therefore is very misleading unless the information is viewed in the correct perspective.

The cost estimate does not include items such as:

Pocket PC licensing fees
Kort estimated that at $20. Reasonable.
ODM profit
Per device? If it is 10-15% I'd be shocked. So, make it $22.
warranty cost
Dell is essentially self insured on this one. A buck or two, max.
packaging cost
Maybe a buck.
manual cost
'nuther buck.
CD cost
2 cents.
software licensing fees for software on the CD
What software? I thought it was all "trial" versions. Whatevert isn't is *HEAVILY* discounted. The developers want on the CD for upgrade fees.
cost of accessories in box (cradle etc)
That is in the cost of that $150 I think. If not, the cradle would be $5-10. Call it $25 for everything.
shipping costs to the US
Maybe $10. Maybe.
currency exchange
Dell hedges that.
cost of "float"
Dell has no float. They have negative days in payables. They get their money from you before they pay their suppliers. Best in the business at it.

So, $150 plus my stuff above is $210. Lets say I was waaaaaaaaaaaay wrong and it comes out to $250. They sell it for $299 with the rebate and that is $50. $349 sans the rebate and it is $100.

[MPSmith]

So the margin on Axims might be high (although that's not likely to be true). Even if so, would someone tell me why that's a problem? For one thing their margin can not be much higher than the rest of the computer industry. I'm quite certain that Dell hasn't found some cheap alien technology to make these PDA's out of. Listen, if you want to talk about high margins, let's look at items like clothing or cars.

The overall point of some of the comments in this thread are eluding me. Here we have a product that has shattered industry price barriers yet we still have those concerned about their profits? That's kinda nutty IMO.

Nice story, but we've missed the point. We ought to be saying "Gee, now I hope more companies start making PDA's. See, you can make a good profit if you make a decent product!"

Am I missing something?

[Paul P]

So, $150 plus my stuff above is $210. Lets say I was waaaaaaaaaaaay wrong and it comes out to $250. They sell it for $299 with the rebate and that is $50. $349 sans the rebate and it is $100.

Minus the 35% incidental cost. :wink:

[Ed Hansberry]

The overall point of some of the comments in this thread are eluding me. Here we have a product that has shattered industry price barriers yet we still have those concerned about their profits? That's kinda nutty IMO.
That is the whole point - that with these really low prices, Dell isn't doing it at a loss, they are making money at it. Possibly good money. That is good for Dell and the Pocket PC market.

[MPSmith]

That's not the way the thread reads. NEVER in this thread has ANYONE said ANYTHING about this being a good thing. (Until I pointed out how negative the thread is heading). I think this is wonderful. Why isn't everyone saying that?

[KiLLiN-TiMe]

So, what are you trying to tell me??? Dell is selling Pocket PC's to make money? LOL!

At least they are not raping us as bad as everyone else in the market is!
Just my two cents…

[MPSmith]

So, what are you trying to tell me??? Dell is selling Pocket PC's to make money? LOL!

At least they are not raping us as bad as everyone else in the market is!
Just my two cents…

Glad I'm not the only one who thinks this way!!!

[Fzara]

Because it's making me think how much I overpayed for my handheld if they had reduced the price a little more, which although would have lowered revenue, might have increased demand and shattered some of the competition (ie. HP, Toshiba).

[MPSmith]

Because it's making me think how much I overpayed for my handheld if they had reduced the price a little more, which although would have lowered revenue, might have increased demand and shattered some of the competition (ie. HP, Toshiba).

Fzara: Your post is one long run-on sentence and a little hard to follow. Are you saying you wish you could have paid less? I got a fair price and I wish I could have paid less! Further, it's nearly impossible for Axim demand to be any higher right now. You can't shatter the competition with demand for your first product. You can increase PPC market share by providing a great product at a great price. Dell is doing that and IMO will have a large share by year end.

Chris hit it on the head with his comments on profit. Go Dell Go!!!

[Paul P]

Here is your answer MP:

At least they are not raping us as bad as everyone else in the market is! Just my two cents…

There are those who paid twice or more for their Pocket PC and those who purchased an Axim. People who paid more (me), did so because they believed they were buying something better. Those that paid less rarely admit that they got less. There were numerous debates on these forums comparing the low-end units with the high-end units. Mostly, it came down to "Axim is just as good as any other Pocket PC that's three times the price." So that is why you tend to see reluctance to praise Dell on its great achievement.

Or not.

[MPSmith]

I was just a little surprised in the way this story was presented. This is a victory for PPC's; nothing less. From what I've been told, that was the intent of the initial post. However, this intent was delivered very well or convincingly.

Paul is probably onto something about his comment that "there are those who paid twice or more for their Pocket PC and those who purchased an Axim...". But that didn't play a role in the post. It was just a little ill-delivered. No big deal and I don't wanna beat a dead horse.

Yaay for PPC! I hope the legacy of 2003 is the low end PPC. We need 'em and users desire 'em.

Mike

[szamot]

..so what are Toshiba and Compaq making out of their customer rape...I don't even want to think about that or the peripherals.

[Rirath]

That's not the way the thread reads. NEVER in this thread has ANYONE said ANYTHING about this being a good thing. (Until I pointed out how negative the thread is heading). I think this is wonderful. Why isn't everyone saying that?

I'm with you man.

[Solom01]

By the way, are human costs such as support, customer service, etc. being considered? If you look at the complaints customers have against Dell (and most computer companies) most of it seems to be about the lack of support. Customers want instant shipping, instant replies, help in using their products, etc. yet, in many ways human costs are the most expensive part of the equation. Since most companies are in business to make some money (most of us don't work for the fun of it, go figure), if you turn an item into a commodity by giving it the lowest possible price there's not a lot of margin left over to provide support. There's nothing inherently wrong with this, but don't expect to buy the cheapest possible product (which nowadays is just about any computer product made) and to also get wonderful customer support. As with just about everything else, our desire for the lowest possible price has reduced everything to a WalMart experience.

[Ekkie Tepsupornchai]

Because it's making me think how much I overpayed for my handheld if they had reduced the price a little more, which although would have lowered revenue, might have increased demand and shattered some of the competition (ie. HP, Toshiba).
Economics. Lowering the price on the Dell may increase demand but that doesn't necessarily translate to an overall increase in Dell's profits.

The other way to think of it is that you might have been willing to purchase the X5 even if it had been a little more expense across the board.

It's a win/win situation really. You got a great deal and Dell made a profit!!

[luebster]

If Dell charged less and thereby increased demand, people would have been waiting months, not weeks, for their Axims. People would have been more likely to balk at the long wait times.

[GoldKey]

If Dell charged less and thereby increased demand, people would have been waiting months, not weeks, for their Axims. People would have been more likely to balk at the long wait times.

Probably the reason the $50 rebate has not been renewed. They had such demand that they with or without the rebate, they could sell as many as they could produce. With that being the case it was an automatic $50 in their pocket on each unit. Those that are more price sensitive will probably just wait until the rebate comes back because there is nothing that competes with the price point for the 300mhz unit and only the 1910 and V35 that compete at the 400 mhz price point. So, a win/win for Dell.

[jpaq]

Come on kids.
I know that none of you expect Dell, or any other vendor, to give their products away at cost. If they did, where would the money for innovation come from?

The reality is, and I apologize for this Jason, that a lot of folks here just like to argue for argument's sake. The article quotes one source. Like the info or leave it. Move on.

Speculation is fine, but there is a fine line between several people speculating and several people telling each other they are wrong.

Arguing:
"The facts are X, Y, and Z."
"No their not. That doesn't make sense. You're wrong."
"No. You're both way off base and I can't belive you think that."

Speculation and Conversation:
"The facts are X, Y, and Z."
"That's interesting. Maybe that's becasue...."
"That could be true, or......"

Be happy!!!

:D

[Bob Anderson]

cost of "float"
Dell has no float. They have negative days in payables. They get their money from you before they pay their suppliers. Best in the business at it.



Boy, you can say that again!

But what this really tells me is Compaq has been laughing their way to the bank for the past two years! The *real* smart player has been Compaq (now HP) who, stuck their neck out as an "early adopter" and must have made a killing on all the $500 iPaq 3630/3635 models they sold. (And no, I don't resent the fact - it's all about good ol capitalism!

[MPSmith]

Wouldn't it be great if we began to see decent $100 to $200 PPC's this year! That would make 2003 truly the year of Pocket PC.

I still don't think we've seen a truly "pared-down" PPC yet. The 1910 is pretty close, but still has some upgraded features, like the small size and good screen. Personally, I think a $150 PPC could be made that consumers would but. Maybe that's what the fabled Dell X3 will be.

It's time that a low end PPC be introduced!!!!

[johncj]

I don't know why anybody believes anything Gartner puts out. Those guys are wrong more often than the weatherman. That said, assuming it's correct, this report doesn't mean Compaq, et.al., are making out like bandits. HP/Compaq's cost structure is much higher than Dell's. The danger in Dell's strategy is that they will put their suppliers out of business.

[jpaq]

Then another supplier steps up and the cycle continues.

:twisted:

What is with the HTML Coding!!!!

The original quote I put in didn't work, now the Emoticon?

Well then fine:

:>(

[TrojanUO]

I don't know why anybody believes anything Gartner puts out. Those guys are wrong more often than the weatherman. That said, assuming it's correct, this report doesn't mean Compaq, et.al., are making out like bandits. HP/Compaq's cost structure is much higher than Dell's. The danger in Dell's strategy is that they will put their suppliers out of business.

Some old reports I saw said Compaq was selling the higher end iPaq's at somewhere around 85% Markup over device manufacturing costs.

[Fzara]

Because it's making me think how much I overpayed for my handheld if they had reduced the price a little more, which although would have lowered revenue, might have increased demand and shattered some of the competition (ie. HP, Toshiba).

Fzara: Your post is one long run-on sentence and a little hard to follow. Are you saying you wish you could have paid less? I got a fair price and I wish I could have paid less! Further, it's nearly impossible for Axim demand to be any higher right now. You can't shatter the competition with demand for your first product. You can increase PPC market share by providing a great product at a great price. Dell is doing that and IMO will have a large share by year end.

Chris hit it on the head with his comments on profit. Go Dell Go!!!

Yes I do wish I could have payed less. Isnt that what we all want? Its about time these features should be low-end, and BT/WiFi w/128mb ram and biometric security should be high-end.

But I guess Dell needs to make their profits, so i'll shut up now. :oops:

[PetiteFlower]

Ok so let's say Dell is making a $100 profit on a $350 item. That's 28%, pretty normal I would think. However, what Dell is selling for $350, other manufacturers are selling for $500 or more, or something very similar to it. Assuming other manufacturer's costs are somewhere around the same, that means that other companies are making $350 on a $500 item--that's 70% profit, bordering on obscene.

There ARE advantages to buying from someone other then dell, instant gratification for one thing, better availability of accessories for another, smaller size and weight for another, but I know for myself, I wanted a PDA, and I wanted one with PPC, but with my financial state, I couldn't justify paying more then $200 for one. So if it hadn't been for Dell, I probably would have gone without, because I did too much research to be able to in good concience purchase a Palm. So I got my Dell, I made my tradeoff and I still think I got a better deal then if I would have spent $100 more for a different brand. I don't care if Dell makes $50 off my purchase or $150, because they allowed me to get the product I wanted at a price I could afford. Either way, we both win!

[garrans]

First up I believe the original folks CPQ et.al have to make more per unit (and good on them) Cost of getting into the business, risk of it not working is very high. Furthermore when they started, they probably went to the manufacturer and said: OK guys, I'll buy 100,000 now then reorder later based on market demand. Mfr says: OK, thats either $X startup plus $Y per unit or $Y + Factor per unit, MOQ = 100,000. Big risk for CPQ, big for Mfr.

Now Dell comes in and says: "Reverse Auction Time: Here's the spec, whats your price. Minimum OQ = 1,000,000 units." Now there are folks out there willing to take the risk themselves and spread startup costs over 2,000,000 units because they know Dell and like the projections.

Name of the game: Get your suppliers to share your risk. But you can only do that after CPQ et. al. have started the ball rolling

I like my CPQ 3650. It'll do for another 6 months or so, then I'll get the next big thing out.

Steve.

[bmanosu]

I agree. This product at it's current price point raises the bar for other manufacturers of Pocket PC devices. Co-workers who recently purchased iPaq's in the office have seen my Axim X5 and turned colors when I told them what the price was. Feature for feature, price for price it was a no brainer. Way to go Dell!

[MPSmith]

But I guess Dell needs to make their profits, so i'll shut up now. :oops:

I'll shut up too!!! :wink:

[Fishie]

But I guess Dell needs to make their profits, so i'll shut up now. :oops:

I'll shut up too!!! :wink:

I wont.
Property is theft so al those capitalist pigs are thiefs stealing and deceiving from this collective we call mankind.

:wink:

[Roosterman]

Persoanlly I wouldn't care if Dell was making 90% profit. The price they charged me for my X5 IMO was incredible and worth every cent. I think that is the definition of a deal. I am happy with the goods and the price and they are happy with the income, everyone is happy. I say more power to Dell if they can give people what they want at a resonable price and make money. :D

[MPSmith]

Persoanlly I wouldn't care if Dell was making 90% profit. The price they charged me for my X5 IMO was incredible and worth every cent. I think that is the definition of a deal. I am happy with the goods and the price and they are happy with the income, everyone is happy. I say more power to Dell if they can give people what they want at a resonable price and make money. :D

Rooster, you have crystalized my thoughts perfectly. If I had expressed myself that way from the beginning, I wouldn't have "offended" certain people. Nicely done!!! :)

[Roosterman]

I wont.
Property is theft so al those capitalist pigs are thiefs stealing and deceiving from this collective we call mankind.

:wink:
I'm suprised you have so much free time away from the fields of the collective. :wink: .

[Fishie]

Ha ha Rasputin, lover of the Russian queen.

Damn I remember the lyrics to a BoneyM song, does that mean im old?

[Jonathon Watkins]

No, it means you are off-topic. :wink:

I agree totaly with Rooster. Fair price, nice device.

[Fishie]

No, it means you are off-topic. :wink:

I agree totaly with Rooster. Fair price, nice device.

And this is an old topic 8)

Just adding that I agree, but I do look forward at machines twice as fast IRL then the Axim X5 400 at a price lower then 300$.
The price wars have started, the coming years will be mighty intresting.