Kemble, Hi! Check this out! Looks like time is on our side! I am definitely not worried about the future! I see the hand-writing on the wall and the fingerprints too! :)
Leigh
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IBM dropping Inacom
ties in wake of Compaq deal
By Joe Wilcox
Staff Writer, CNET News.com
January 7, 2000, 4:40 p.m. PT
Ripple effects from Compaq's acquisition of the
distribution wing of Inacom are spreading, as IBM
today said it would terminate the bulk of its
multimillion-dollar relationship with the distributor.
The move eliminates one of the uncomfortable tangents of
Compaq's $370 million acquisition earlier this week. By
buying Inacom's distribution division--which ships billions
worth of computer equipment from manufacturers to
customers annually--Compaq effectively was in line to
become a lead distributor of Big Blue and
Hewlett-Packard products. As a distributor, Compaq
would have been privy to competitive information it
ordinarily wouldn't get.
"It should come as no
surprise that we are not
going to authorize
Compaq as a distributor of
IBM product," said Jon
Judge, general manager of
worldwide sales and
service for IBM's Personal
System Group.
Prior to the Compaq sale,
Inacom's relationship with
IBM was fairly extensive.
Not only did Inacom
distribute IBM products, it
built and configured IBM
PCs and provided services
to Big Blue customers.
Inacom's stock rose to 9 on the day the Compaq deal
was announced but has dropped back to 6.06. Inacom
executives during a conference call about the deal said it
would reduce earnings.
The pact between Compaq and Inacom is largely a
marriage of convenience. Compaq wants to start selling
more PCs directly and needs the distribution and
logistics systems that Inacom will give them. By
contrast, Inacom, like a number of other distributors, has
been struggling with thin margins.
IBM plans to terminate the last three relationships
effective when Inacom completes the facilities sales to
Compaq, perhaps as soon as 45 days.
"We will transition our relationship to Inacom appropriate
to the new business model they have put themselves in,"
Judge said. IBM will reduce Inacom to a second-tier
distributor that must buy products through another
wholesaler.
The "co-location" relationship between IBM and Inacom,
where a distributor rents space in a PC maker's
manufacturing facility in order to build computers, will be
potentially the most difficult relationship to sever.
Gates-Arrow, MicroAge and Pinacor are among the other
distributors with co-location operations with IBM.
This is not the first time a Compaq acquisition has
disrupted long-standing relationships. After Compaq
announced it was buying Digital Equipment Corporation,
Dell Computer found itself seeking a new partner to
provide on-site services and consulting. Digital was on of
Dell's primary field partners.
IBM is not the only Compaq competitor whose systems
are distributed by Inacom. Others include Dell and HP,
and they may follow IBM's lead.
"We obviously were disappointed when we found out that
Inacom had sold a large part of its business to one of our
biggest competitors," Judge said. With that, our first
concern is our customers and to make sure they are
minimally impacted by this decision Inacom and Compaq
have made."
News.com's Michael Kanellos contributed to this report.
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