Mohan,
RE: CPQ Channel Reorganzation
>why do you construe this as a negative for CPQ?
CPQ vowed loyalty to the channel many times since announcing their BTO initititive around July. Now they are in the process of getting rid of the ~90% of their channel.
Trouble in the channel could be a major problem for CPQ.
CPQ seems to have a new policy toward the channel.
The policy seems to be to "stuff them and stab them".
The return privileges for the retailers have been cut severely.
A major disruption in the channel could cause the channel to shift their support behind HWP and IBM as well as their own private label retail computers.
>According to CPQ they are reducing the number of channels so that
>they can provide a better and improved customer service.
This is an tacit acknowledgement by CPQ that their customer service is not adequate. This has been supported by numerous articles in the rags.
In reality, this is the beginning of consolidation of the retail channels and the retail channels will not die quietly.
>If I were to believe their intentions,then I would have to disagree
>with you.
It is okay to disagree with me. I will listen to intelligent discussion but like Spock I have little use for the argument ad hominem.
> I don't suppose CPQ is so naive as to take such an action that
>would jeopardize their own well being or would they????
CPQ is anything but naive. They know exactly what they want to do.
The problem is that their relationships with the channel are getting in
their way. They are taking the steps that they consider neccessary to remain a top PC company. The company to beat is DELL. However, the problem for CPQ is that while they are trying to match DELL, HWP and IBM are going to be after the retail channel (which CPQ is alienating) and CPQ may endup losing big chunks of their business to these aggressive companies. If what I am saying turns out to be correct, then look for large share gains at the retail level by these two companies.
They will not achieve a 2-3 week inventory pipeline anytime soon
as long as they have to sell through the retail channel. Eventually, they will go direct.
Problems have been reported with the BTO model by the channel. The most recent comment is that there are problems and they will not be able to achieve their targets for inventory levels for a year or more.
The margins in these channels is very thin- less than 1% of revenues.
These companies will go where they can get the best deals.
I welcome constructive discussion of these issues. Am I negative on CPQ? In a way , yes! But it is because of these problems which I consider very serious. I do not personally have anything against the company. In fact, I have made money trading their stock this year.
Incidently, if CPQ is successful at stuffing the channels, what happens to all those 3,600 retailers that have unsold inventory in January when CPQ fires them for non performance and makes them eat the inventory? This is major news! The other shoe has dropped!
I will ignore steve's twisted comments since he is a CPQ bull and most of his holdings are in CPQ. (gggg)
Regards,
Jim Kelley |
