From IBD. Seems like Compaq frequently makes a dumb statement. Was
that comment even necessary?
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Date :01/31/2000
Author :Lynn Walford
Copyright :Investor's Business Daily
Title :Compaq Nets Some Gains In Building
Web Presence
By Nick Turner Investor's Business Daily
In its struggle to fend off Dell Computer Corp.
and other direct sellers, Compaq Computer
Corp. may have something to crow about.
Over the holidays, traffic on Compaq's Web site
almost matched that on Dell's. Online tracker
Media Metrix Inc. says Compaq's site,
Compaq.com, drew 522,000 daily visitors during
the season, making it the 22nd most visited
electronic commerce site.
Good Company
Dell.com, meantime, averaged 582,000 visitors,
ranking No. 20. No other PC maker made the
top 25.
That Compaq ranked so close to Dell is
noteworthy. Since Dell opened its Web store in
July 1996, its online sales have grown to $35
million a day. It's one of e-commerce's most
dramatic successes.
Compaq would do well to duplicate the online
achievements of its cross-state rival (both
companies are based in Texas).
"Dell has been doing a marvelous job of selling
PCs online," said Doug McFarland, general
manager of New York-based Media Metrix Inc.,
which tracks Web traffic. "And Compaq has
moved aggressively."
Compaq credits the gains to sales to individual
consumers.
"I suspect that the popularity of our consumer
PCs was one of the reasons" for the increased
traffic, Compaq Chief Executive Michael
Capellas said last week, when the company
announced quarterly earnings. Of course, the rise
in visitors doesn't necessarily translate to an
increase in online sales. Many shoppers could
simply be gathering information. Compaq won't
release online sales, so it's difficult to draw
conclusions.
But the level of traffic is heartening the company,
a Johnny-come-lately to selling over the Web.
Components Crunch
And Dell may be vulnerable. The Round Rock,
Texas-based company last week reported that
fourth-quarter sales and earnings will be well
below expectations.
Dell says it expects to earn about $430 million,
or 16 cents a share. Wall Street expected 21
cents, according to First Call. Dell blamed
microchip shortages and a slowdown in sales
over Year 2000 fears.
Dell, which sells directly to customers, builds
PCs to specific orders and operates with as little
inventory as possible. Dell is lauded for its
efficiency, but its model can spell trouble during
supply shortages.
Last year's earthquake in Taiwan, home to
several computer-part plants, left Dell struggling
to fill orders. Lingering supply problems haven't
let the company catch up.
Still, the direct model has allowed Dell to
explode in size. According to recently released
sales data from researchers Dataquest Inc. and
International Data Corp., Dell passed Compaq
to become No. 1 in U.S. PC sales in 1999.
That's the first time Compaq has lost the
domestic top slot since at least 1995. It's still No.
1 worldwide, however. Compaq has struggled to
mimic Dell's efficiency over the past two years.
The Houston-based company still hawks its PCs
mainly through retailers and other resellers. Its
Webstore reflects the company's effort to deal
more directly with customers.
Spotty Growth
Compaq hasn't enjoyed consistent sales growth
since 1997. The company last week said it had
fourth-quarter sales of $10.5 billion, down 4%
from the year-ago period. Compaq reported
earnings of $322 million, or 19 cents a share,
compared with 43 cents last year. Despite the
drop, the results beat expectations of 16 cents.
Compaq's Web traffic may signify that its direct
marketing is paying off.
But Dell says Compaq is a long way from
matching its site.
"You can't just stick an indirect model on the
Internet," said Klee Kleber, Dell's consumer
marketing director.
Dell has built its culture around dealing directly
with customers, and that's why its Web store is a
natural fit, Kleber says. Compaq can't provide
the same connection with buyers, he says,
because most of its computers still flow through
resellers.
"And our site is about a lot more than sales,"
Kleber said.
"It has tech support, questions and answers - it's
a major resource for users," he said.
The sales element of Compaq's Web store isn't
as complete as Dell's. Often, Compaq models
aren't available online. If a particular PC can't be
ordered via the Net, the site directs you to the
nearest retailer.
What's A Web Sale?
But Dell has been criticized over how it defines
an online sale. It claims to generate more than
$35 million a day, but many of those sales aren't
done entirely via the Web.
If a customer uses the Dell site for research, then
calls a sales representative on the phone to buy a
PC, Dell counts that purchase as an online sale.
Compaq says it's unconcerned with how much of
its revenue eventually comes from the Internet.
The company wants to increase sales in every
channel. It's particularly keen on kiosks in large
retail stores that allow customers to customize
and order PCs. It's been using them for about 18
months.
The machines are then delivered directly to the
consumer, or they're shipped to the retail store,
where the buyer can pick them up.
"People define direct sales differently," said
Compaq spokesman Alan Hodel. "The way we
look at it, we consider (kiosks) a direct sale."
And Compaq has beefed up its support staff to
make direct sales run more smoothly. It's added
300 people to its call centers.
Dell's Kleber sees buzz on the Compaq site as a
good thing for everyone.
"If they're driving a lot of traffic online, that's
healthy," he said. "Customers can comparison
shop and check prices and features."
In the end, he says, they'll choose Dell. |
