ZDNet: Where else might there be consolidation? Who's on the bubble?
Marengi: Forty percent of computers sold are sold by non-branded companies. So there's some room for consolidation. But, will it consolidate under us (Dell, IBM, and HP)? Probably not. Then, there's Sun with $5bn (£2.94bn) in the bank. Flip a coin there.
ZDNet: Gateway?
Marengi: Gateway is not a computer company anymore. Right now, they're making their name in plasma TVs. If you want to spend under $3,000 for a plasma TV, then Gateway is the place to go. But in the spaces we play, we don't run up against them in competitive bids.
ZDNet: Where else does the Dell model apply?
Marengi: MP3 players. Have you seen our MP3 player yet? It should be very disruptive to the market. It's amazing what you get for the money. We have our own music store queued up. The whole thing is ready to rock and roll.
ZDNet: Is there any more room to squeeze more profit out of the model?
Marengi: One way to do that would be to lower our DSI [Editor's note: DSI or "days in sales inventory" is the period of possession of sales-related inventory measured in days.] We run an average of about four days on DSI, a number that's stated in our quarterly report. Our ability to control DSI is directly related to our ability to do demand shaping based on supply. In other words, DSI depends on what supply constraints exists or don't exist. We'd love to get it down to one day. But our first push will be to cut the current DSI in half. What would really be great is if we didn't hold any inventory at all. The product would flow directly from the supplier into the product.
ZDNet: Will pushing down your DSI affect your flexibility on the components? You may have to commit to a hard drive or memory vendor instead of being able to switch.
Marengi: We're very demanding on our suppliers. We require that things be done in a certain way and to a certain quality. We monitor the service level agreements we have with our suppliers very closely and we put a lot of money into quality field engineers. These are Dell employees that sit in our suppliers' shops in Malaysia and they monitor the quality of the product as it comes off the line. If the product isn't up to snuff, then they must remedy the problem or we'll stop [doing business with] them. Right now, we have no single vendor for any thing. Diversity helps with performance. If one supplier has to be cut, and we can ramp up a second supplier very quickly.
