back to article Dell shoots for number one in servers, adds OpenStack to public cloud

It is Dell World day two, and company founder, chairman, and CEO Michael Dell took the stage a half-hour late to talk, once again, about the repositioning of the company that bears his name to be a bigger player in the IT racket. He also invited former President Bill Clinton, who spoke for what seemed like about three hours …

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FAIL

Self-serving politicians and their self-serving retconning

Woah, let's just immediately hit the buffers here. Ex-President Clinton should slink back to where he came from. While arguably fighting rearguard actions against retarded conservatives out for blood, he gave us Clipper Chip Proposals and an endless stream of Big Brother Productions, laying the groundwork for the 21st century perversions of Bush/Obama, he bombed Yougoslavia for no good reason, wrecked Iraq for no good reason, gave us no progress in the Middle East, exploded with philandering extravaganzas onto TV, revved the "dot com" bubble (the latter by ordering up some easy money from the serial mumble Greenspan so as to look good politically) and I don't know what else.

Ok, back to basics. What do I hear?

"If you are interested in particle physics, earlier this year, finally at the CERN superconducting supercollider – which I tried to build in Texas, by the way and you may remember your former senior Senator, Lloyd Bentsen, who became my first Treasury Secretary, came to me and said we were trying to make a budget deal back in 1993. And he said, 'We can't get the votes unless we give up the supercollider.'"

Ok, here's the actual story...

From "The Decline and Fall of the SSC" by John G. Cramer -- Alternate View Column AV-84

"It is common wisdom in Washington, D.C., that it is dangerous for a large project to span more than one Administration. Bush was defeated by Clinton in 1992, and the SSC project came to violate this rule and suffer the consequences. In 1993 the incoming Clinton Administration made a budget-tightening decision to stretch out the SSC project, moving its date of completion from 1999 to 2003, increasing the overall cost of the project while reducing its yearly cost. The SSC cost rose to over $10 billion, a 16% cost increase. The budget-conscious freshman Congressmen swept in with with Clinton in November of 1992 felt no responsibility for the decisions of their predecessors, and the SSC project became a tempting target of opportunity. Clinton's new Science Advisor John Gibbons did not give active support to the SSC project, as had his predecessor, Alan Bromley, and Clinton's new Energy Secretary Hazel O'Leary, now famous for her million dollar travel excursions, proclaimed during her confirmation hearings that she was "not passionate" about the SSC. In September, 1993 when her passions were finally aroused, she took the counter-productive steps of re-shuffling major SSC contractors and increasing the already bloated oversight team to 140 bureaucrats in the Dallas DOE Office. Before the two critical votes in June and October, neither Clinton nor Gore was willing to make personal appeals to House Members on behalf of the SSC, as Bush had in 1992. The final blow to the SSC came late in 1993 when the DOE's Baseline Validation Report was released. The validation group surveyed the sorry history of SSC cost escalations and concluded that extreme conservatism was needed. Their report advocated much larger safety and contingency margins and moved the completion date back to 2004, increasing the project cost to $11.5 billion or another 15% increase. With this, rank-and-file members of Congress had had enough. They were fed up with the ever-rising SSC price tag, the evidence of poor management and DOE indecisiveness, and the heavy-handed attempts by Congressional Leadership to save the project. On October 27, 1993, by a vote of 283 to 143 the House rejected the Conference Committee report that would have continued SSC funding. The project was officially dead."

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Quand c'est foutu, c'est foutu!

And then....

"Some would say Clinton got his second term and budget surplus because of the dot-com boom, so maybe he should be Bubba Dot-Com. It has been almost 20 years since Clinton was first inaugurated, and Clinton said it was hard to believe it has been that long."

Yeah. Here's something that was written in January 2001. It still applies to January 2013. It's hard to believe it has been that long.

Clinton's legacy, January 2001

White House insiders have said for years that Bill Clinton has been desperately seeking a legacy for his administration – other than having been impeached and having disgraced himself and his office. At long last, he has at least two of them.

The first of these is the coming recession, his first gift to the incoming administration of George W. Bush. Like the invasion of Somalia that Dubya’s father had handed Clinton upon taking office, this is surely going to cause some heartburn for the new president, even if it provides a strong rationale to pass the tax cuts on which he campaigned.

Clinton’s second legacy will be soaring prices for oil and electricity. All during his presidency, he and his underlings conducted what amounted to a jihad against energy producers, along with owners of other natural resources. A soft economy in Asia mitigated some of the inevitable price increases, but reality finally came to bite Clinton and company this year with a vengeance. It will be up to Bush to follow more sound policies, although the same groups that supported Clinton’s anti-energy policies will hog the media spotlight if the new president follows economically-sound policies....

No such luck with Dubya of course, but let's stay on track....

The Fall of the Dot Coms

Dependence upon the Keynesian paradigm keeps Business Week and its allies from understanding the nature of the current business slump. The current high-tech morass is not due to any lack of aggregate demand or quirks in the tax code. Instead, we are seeing once again the classic business cycle as first outlined by Ludwig von Mises in 1912 and again by Mises, F.A. Hayek, and Murray Rothbard in later works. This seeming cluster of entrepreneurial errors has come about because Greenspan and the Fed shoved billions of dollars of new money into the economy, triggering malinvestments that now must be liquidated. Any scheme – monetary or fiscal – by the government to reverse this current trend will only make matters worse.

Furthermore, new money does not arrive by helicopter or a Brinks truck at your door. New money comes into the economy through the banking system, as banks lend their excess reserves within the fractional-reserve pyramid. Such actions are accomplished through the Fed’s massive purchases of government bonds in its open market operations, as well as the lowering of the Fed’s key lending rate by fiat.

For much of the second term of Bill Clinton’s administration – and especially during the Monica Lewinsky scandal – the Fed, under Greenspans’s aggressive leadership, pumped new reserves into the system, with much of the lending going into capital markets. Furthermore, the Fed’s lowering of interest rates encouraged venture capitalists to pour their investments into the Internet startups.

At first, the scheme seemed to work. The infusion of new money into the high technology sector soon translated into a stock market boom, which increased both the Dow Jones and NASDAQ indices by huge amounts. Soon after came the parade of "Dot Com" multi-millionaires who saw the value of the stocks they owned zoom to unbelievable levels.

However, as Mises, Rothbard, and Hayek would have noted, the pattern of new investment did not fit the pattern of consumer spending. While the advertisements for some of these new startups made a big splash during the Super Bowl last January, they didn’t translate into consumer demand for their products and services. By the late summer and early fall, many of the once-hot Internet stocks had plunged to near-penny stock levels. The Austrian Business Cycle theory, ignored by academe and the political classes, had once again proven true.

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Oh yeah, he also emptied the White House of the taxpayer-provided decorations when he left including some stuff that was hanging around there for quite a few decades time. And IIRC, the window curtains. Just sayin'

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Anonymous Coward

So what.

Remember when Dell was bragging about being on pace, and then becoming, the largest PC seller in the world... by the revenue number, not the irrelevant boxes shipped number. They accomplished their goal and then figured out that they had been rope a doped into working crazily to become the leader of a largely worthless low margin business. This is version two. x86 servers are PCs a few years removed. They have zero software value add and are just cases for Intel's technology. It is low-tech. x86 servers with no additional value add will probably all eventually go to Lenovo or another low margin provider. The people who make money on x86 servers are Microsoft, VMware, and to a lesser extent Red Hat.

In summary, even if Dell were the number one x86 server provider in the world, it would not be a great thing. Second, they are not even close to matching HP in x86 server revenue or IBM in total server revenue. IBM is practically in an entirely different market with Systems p, i and z. Those are software platforms which happen to include the hardware. Extremely high IP value add.

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