rudedog:
we have discussed before the possibility that one of iPaq roles is to be a cost-neutral (or slightly profitable) module in large integrated systems, and that the other components of those systems - servers, storage and services would represent an increasing proportion of COMPAQ's profits. Implicit in that is the idea that high unit sales of iPaq's might continue to contribute to COMPAQ's bragging rights as No.1 (eventually to be No.2 after DELL)but eventually the market would appreciate that unit sales are less important than profits and that PC's were merely an adjunct to COMPAQ's other sources of profits.
The commercial desktop business represents 30% of CPQ's revenue currently. If that was cut by 30% (say by a fall in average ASP as projected above) it would, in itself, represent a cut of 10% in revenue...
That assumes that the number of units remains constant. But you mentioned a few weeks ago that the comparable DELL model is not as attractive in power, features or price. So one of the effects of iPaq could be a signficant gain in market share expressed as units sold. Any such increase in units would increase your revenue expectations, somewhat.
The combination of those effects puts CPQ at the 15% to 17% that Capellas is suggesting....
One would assume that even if your main idea is correct, he was still being conservative. More growth might be had (a) from higher iPaq unit sales than you have allowed for (b) continued high levels of consumer PC's sales (c) other new appliances.
had to give guidance on earnings...
The guidance did not smell right. Therefore, it is reasonable to question why. Your idea is plausible. But I have some reservations about the idea that they would cover it up. Why would they? The only thing DELL or HWP could do about such a plan is to enter into a price war to blunt the iPaq strategy, but iPaq has other competitive features than the price and COMPAQ would win a price war. So if it was covered up for a couple of months lead in marketing initiaitve, can COMPAQ do that? Would not such an explanation of future earnings and corporate strategy be owed to shareholders and analysts? That is not a rhetorical question. |
