Merrill on Compaq Global Services Day
by: skeptically 08/10/01 08:47 am
Msg: 248373 of 248377
10 August 2001 Steven M. Fortuna First Vice President
Michael Hillmeyer Industry Analyst
Compaq Computer Corp
Highlights from Compaq Global Services
Day
• Yesterday (9 Aug.), Compaq held its first Global<
• Compaq Global Services currently has 38,000
employees, of which 10,000 are contract workers.
This gives Compaq a great deal of flexibility during
lean times. In the recently reported June quarter
(2Q01), Compaq Global Services revenue came in
at $1.94 billion (23% sales), up 6.8% yr/yr (up 13%
yr/yr in constant currency) and up 0.4%
sequentially. Compaq’s goal is to grow its services
business to around 33% of total revenue with both
the Enterprise and Access segments each
contributing similar amounts. The company’s
target growth rate for services as a whole is 10%-12%.
The target growth rate for professional
services is 15% while that for customer service is
high single digits.
• Within Global Services, customer service revenue
was up 2% yr/yr (7% in constant currency) in the
June quarter while the higher margin professional
services segment saw revenue rise 7% yr/yr (15%
in constant currency). Support Services makes up
56% of the services mix while Systems Integration
is 25%, Outsourcing is another 10% and the
remaining 9% is Compaq Financial Services.
• We are maintaining our Accumulate (B-2-2-7)
rating on Compaq shares.
a couple of excerpts:
>Compaq believes that it is differentiated from its competition by
providing the most extensive multi-vendor, multi-technology
services (i.e., it will support competitive environments), global
reach (around 200 countries), and defined practice areas, both
vertical (such as financial services and telecom services) and
horizontal (i.e., outsourcing and systems integration). In
addition, Compaq Financial Services can provide customized,
global financing from a single source.
revenue.<
>• Compaq gets better service opportunities when it deals directly
with the end user rather than by selling through the channel. Its
attach rate for services varies widely by product type. For high
end Himalaya systems, clustered Alpha servers and direct Alpha
sales it is virtually 100%. For the direct sales of Proliant servers
(Intel processors) it is around 50%. Attach rates for indirectly
sold Alpha and Proliant servers are less than for direct sales.
The overall attach rate for services in North America is around
12%, and Compaq’s goal is 20%-25%. Compaq estimates that a
1% increase in attach rates leads to $100 million in incremental
revenue.<
>•Compaq invited two important customers to speak at the
meeting. Interestingly, one of these, the CIO of SBC
Communications, indicated that he is sticking to a 36 month
replacement cycle for desktops. SBC is doing this both in order
to keep the total cost of ownership down and to avoid the need
to replace a large number of systems in any one period in the
future by skewing the replacement cycle now. This has been
one of our more important arguments in predicting that
worldwide PC unit demand next year is likely to be quite
healthy. Our current forecast calls for worldwide units to be up
17.5% in 2002 after falling 5.0% this year. |
