Jimbo;
Too many people are simply tired of waiting for cpq to start showing a meaningful turnaround. However, a number of factors have come together to make the so-called cpq turnaround a nightmare. Without a doubt, one of those factors is the scorched earth pricing approach taken by Michael Dell. Michael Dell has recently demonstrated his willingness to slash profit margins to gain market share in the short term. The lower cost of dell products allows dell to sell at or slightly above cost, thereby forcing cpq to sell at a loss to match prices. CPQ must lose the war to the extent that dell and cpq compete on similar product lines!! The straw that broke the camel's back vis-a-vis cpq, as far as I'm concerned, was seeing that cpq simply could not change it's model sufficiently enough to compete with dell on price. For reasons unknown to me, cpq simply cannot match the cost structure of dell, despite cpq's best efforts to sell direct to a certain portion of its customer base. And remember, I am not talking about retail sales through third parties. Cpq has been unable to carve out its direct sales from its third-party retail sales and allocate costs accordingly. In other words, the cost of selling computers through its traditional channels is so high that they far outweigh the savings realized through the direct model. Consequently, cpq cannot beat dell unless it is willing to eliminate the retail channel entirely. Furthermore, right or wrong, I have come to the conclusion that carving out the costs associated with the retail cpq channel, the dell computer is still cheaper. I have reached the conclusion that the direct labor hours to assemble a cpq computer is higher than the direct labor hours to assemble a dell computer. If I am correct (and I am only reiterating what I have been told by those in the industry), then the argument regarding the retail model of cpq vs. direct model pf dell is minimized. In other words, even if cpq and dell had the same marketing model, dell would still beat cpq because it is more efficient in the manufacturing process!! If what I have just suggested is true then no-one is to blame but cpq and its management team!! On an apples to apples basis, it appears that the dell computer is cheaper!! End of story! Therefore, cpq will either have to become more efficient and reduce its manufacturing costs or make it up in those segments where it does not have to compete directly with dell. Either way, it is obvious to me at least, that Michael Capellas is not up to the manufacturing challenge. |
