Computers & Technology Micron Alters Its Advertising, PR, Marketing
Investors Business Daily, Tuesday, May 12, 1998 at 12:10
Dell Computer Corp. and Gateway Inc. have crowed aplenty about the
value of selling personal computers directly to users.
Fellow direct-seller Micron Electronics Inc. wants to share in the
glory. The company has been praised for its product innovation, but
it hasn't done as well with its direct-selling model. Dell, which
turns over its inventory about once a week, is far more efficient.
In addition, fierce competition in the notebook market has hurt
Micron's bottom line.
In its second fiscal quarter ended Feb. 26, Micron reported a loss
of 73 cents a share, down from earnings of 30 cents in the year-ago
period. Sales at the Nampa, Idaho-based company fell to $494.8
million from $510.3 million. This quarter, analysts surveyed by
First Call Corp. expect the company to earn 4 cents a share, down
from 20 cents a year ago.
Joel Kocher looks to turn things around. The veteran Dell
executive joined Micron earlier this year as president and chief
operating officer. He recently spoke with IBD about his strategy.
IBD:
What are the keys to getting Micron back on track?
Kocher:
The company traditionally has been one of the top award winners in
our industry. For example, every notebook that we have ever put into
the marketplace has won PC Magazine's Editor's Choice, which is
probably the most prestigious award in our business. However, our
problem has been that our marketing and sales engine has been anemic.
It's far below what Dell and Gateway have done.
We're the No. 3 direct player, but I don't believe we've optimized
the execution of our market. So our key activities are to
dramatically improve the communications of our brand and to take a
much more exciting and relevant approach to advertising. We have a
new advertising agency, a new public-relations agency and we have an
entirely new marketing team, from the VP of marketing on down. We
have put people in place at Micron who understand how to market
direct.
IBD:
Does your business model differ from Dell's and Gateway's?
Kocher:
For the moment, we're focusing on the basics. The basic execution
of the model would be very similar to what Dell is doing. The key
difference is that we think we have a product and technology
advantage over Dell and Gateway. If we can execute this model the
way it's supposed to be executed, we can leverage that product
advantage against Dell and Gateway. Historically, because of the
lack of execution, we haven't been able to do that.
IBD:
With low-cost PCs the rage, is product innovation still valued?
Kocher:
The customer who buys direct (values innovation). They have a
greater appreciation for speed and performance and innovation than
people who are buying computers for the first time. But that
technology has to be delivered to the customer within a competitive
price range. We know we cannot command a 20% price premium.
IBD:
Dell gets many orders via the Internet. How many of your sales
have shifted to the Web?
Kocher:
Our online sales constitute a large percentage of our sales. As a
matter of fact, we believe - based on the information that Dell has
disclosed - that our online sales are about the same percentage of
our overall sales as Dell's, if not more.
IBD:
What are your goals for turning over your inventory?
Kocher:
We're not currently in a position to target what Dell's doing.
They're leading the pack, and they've done a great job executing, but
it took them a decade to get there. On the other hand, I think it's
entirely reasonable for us to target the midteens in terms of days.
We're making progress toward that goal.
Over the long term, obviously, our goal would be to achieve what
Dell has done. But even at the midteens, you put yourself in a
position to capitalize on the declining cost curves of components and
hit these product transitions extremely quickly. We're in a business
of product transitions. If you can enter these transitions with
clean inventory, you put yourself in a position where you can run for
daylight.
IBD:
There's been a lot of fuss about all the Compaq Computer Corp.
inventory in the sales channel. How is that affecting you?
Kocher:
From a timing standpoint, the Compaq debacle could not have
occurred at a worse time for us. We're in the early stages of a
turnaround right now. With the glut of inventory and all the write-
downs in the channel, clearly it's affected our business. But we're
playing for the long term.
Companies or Securities discussed in this article:
SymbolNameNASDAQ:DELLDell Computer CorpNASDAQ:MUEIMicron Electronics IncNYSE:CPQCompaq Computer Corp
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