jim: 3.8 weeks is correct from the Financial statement
If accurate, these inventory figures are disappointing, especially in view of Capellas recent statements which suggested it was closer to 2 weeks and that further reductions were a priority. The promise that they were aiming for 7-10 days when the 5 distributors were set up earlier in 1999 seem a distant memory.
However, as you know, COMPAQ has traditionally seen an increase in inventory in the 4Q because of the need to ensure that during the Christmas season re-sellers do not run short of stock. This excess inventory then has to be got rid of in 1Q, usually at a discount, causing a slowdown in the sale of new stock in 1Q.
This year there are some big, positive differences.
1. 3.8 is a lot better than the 8-10 weeks it was last year.
2. This year the inventory-in-channel was not booked as sales - as it has been in the past. If it were, the revenues and earnings bottom line would have appeared better than they were (if less truthful).
3. This 1Q much of the old inventory would have to be discounted, anyway, because of the onset of iPaq and EZ2000.
On the whole, comparing 3.8 weeks inventory (not booked) this year, with 8-10 weeks inventory (booked) last year is a major cause of the apparent drop in year on year revenues for PC's. Now that 4Q 1998 bulge is out of the snake's belly, future year on year comparisons should be easier. |
