Compaq details its direct-sales hopes
By Bloomberg News
Special to CNET News.com
January 28, 2000, 1:10 p.m. PT
HOUSTON--Compaq Computer plans to adopt a direct sales strategy for
most of its corporate PC sales in North America, emulating the model
pioneered by rival Dell Computer.
By year's end, Compaq predicts 60 percent of its PCs for corporate customers
in North America will be sold directly from the company, rather than through
a distributor. The company now sells 85 percent of its PCs "indirectly."
''Anyone who sells indirect loses
money today,'' Compaq senior vice
president Michael Winkler told a
meeting of analysts and investors at
the company's Houston headquarters.
''Anyone who sells direct makes
money.''
Moving toward direct sales is part of
the strategy outlined by new chief
executive Michael Capellas. Capellas,
who was named in July to replace
ousted CEO Eckhard Pfeiffer, wants to
position Compaq to be the company
that makes any machine related to the
Internet, from powerful servers that run
Web sites to hand-held devices that
can receive email via wireless links.
Capellas said the company expects to sell 40 percent of its PCs worldwide
directly to customers by year's end.
Dell Computer, founded in a college dorm room in 1984, overtook Compaq
last year as the biggest seller of PCs in the U.S. by using a direct-sales
strategy.
With indirect sales, distribution costs account for about 15 percent of the
revenue from each machine. With direct sales, the cost falls to about 2
percent, Winkler said.
Compaq's corporate PC business lost $79 million in the fourth quarter,
compared with a profit of $157 million in the year- earlier quarter. Winkler
predicted that the division will return to profitability in the second half, in
part because of the direct sales.
Copyright 2000, Bloomberg L.P. All Rights Reserved.
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• Compaq buys distribution assets from Inacom January 4, 2000
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