Here's the news:
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May 7, 1999
Dow Jones Newswires
DLJ Analyst: Compaq To Consolidate N. Amer Distribution
Dow Jones Newswires
By Anthony Palazzo
BUENA PARK, Calif. -- Compaq Computer Corp. (CPQ) is set to streamline its North American distribution strategy, authorizing four exclusive distributors to sell Compaq products, according to Donaldson Lufkin & Jenrette Securities Corp. analyst Kevin A. McCarthy.
Earlier, McCarthy issued a research note that said the four distributors to be announced Monday are Ingram Micro Inc. (IM), Tech Data Corp. (TECD), Inacom Corp. (ICO) and Merisel Inc. (MSEL).
Others, such as MicroAge Inc.'s (MICA) Pinacor unit, privately held Entex Information Services Inc. and numerous regional distributors, will be forced to source their products from one of these four, McCarthy said in the note.
All four will expand existing co-location facilities, allowing Compaq to further reduce channel subsidies such as price protection, McCarthy said.
"We believe Monday's announcement is a positive for the four distributors named and for Compaq as well," he said in the note.
Shares of the four distributors named in the note each rose sharply on Friday in heavy trading.
Tech Data rose 2 1/4, or 8.7%, to 28 1/8. Ingram Micro was up 2 1/8, or 8.6%, to 26 7/8. Merisel was up 3/4, or 54.5%, to 2 1/8, while Inacom tacked on 15/16, or 9.4%, to 11 5/8.
MicroAge's stock is off 7/16, or 8%, at 5 1/16.
Compaq plans early next week to make an announcement about its U.S. distribution strategy, said spokesman Alan Hodel.
"Compaq has been in discussions with our U.S. channel partners to maximize and enhance our distribution model," he said. "We expect the discussions to lead to refinements in that model that will benefit Compaq, our channel partners and our customers."
Compaq will make an announcement at noon EDT, a Tech Data spokeswoman said. She said the webcast will be available through the Tech Data and Compaq Web sites.
A spokeswoman for Ingram Micro said simply, "Stay tuned."
Officials at Merisel and Inacom had no comment.
Compaq has been struggling to improve its distribution system to better compete with Dell Computer Corp.'s (DELL) more efficient direct-sales strategy.
Recently, Compaq has been criticized for offering the same products at different prices, depending on where they're sold - through the Internet, traditional retailers and resellers, or direct sales.
In his note, DLJ's McCarthy said the co-location strategy to be announced by by Compaq, dubbed "U.S. Alliance," "is emerging as a successful formula for improving the inefficiencies of indirect distribution."
Under co-location, McCarthy said, there is no field inventory, and distributors can provide configuration services at the place of order, leveraging third-party products to drive higher "revenue attach rates."
- Anthony Palazzo; 714-739-5538; tony.palazzo@cor.dowjones.com
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Regards - Dale |
