Steve:
Good point re: the channel partner reduction - some more fuel for the fire...
Check this out:
Channel Inventories
01:50pm EST 16-Dec-97 SoundView Financial Group (Tom Cal)
Channel Inventories
Our survey of major North American corporate resellers and aggregators suggests
that here has not been a significant reduction in PC inventories in recent
quarters.
a) (Context): During the last several years, end-of -quarter PC inventories
have ranged from 5 weeks to 7 weeks.
Intra-quarter, we believe inventories at times have been even higher, at perhaps
8 weeks or more.
The low of 5 weeks was reached in mid 1996, when the shortage of laptop
computers was the most acute.
Reseller Forward Weeks in Inventory (end of quarter Inventory / next quarter's
cost of sales)
Q395 Q495 Q196 Q296 Q396 Q496 Q197 Q297 Q397 Q497E
6.2 6.8 5.8 5.4 6.3 6.8 6.1 6.3 6.1 6.3
b) PC inventories across the channel are currently at approximately 5-7 weeks,
with a point number of 6 ® weeks being our best estimate.
We believe that laptop inventories are higher than desktop/tower inventories.
We believe IBM inventory levels are approximately 7 weeks.
We believe Compaq inventories are approximately 6 weeks.
We believe HP inventories are approximately 5 weeks.
c) IBM and Compaq are currently offering incentives to the channel to purchase
inventory during December that the channel would not purchase until some time
during 1998 if not for the incentives.
In contrast, HP ha s consistently avoided channel-stuffing.
Despite talk of final assembly and supply chain re-engineering, and goals of
having "3 weeks of inventory by year-end" PC OEMs continue to offer the channel
buy-in incentives. We believe these incentives artificially increase channel
inventories, and make the indirect channel less cost competitive than it
otherwise would be.
d) We believe the bulk of the inventory reduction towards the PC OEM's goal of 2
weeks has yet to occur.
We believe the reduction towards the goal of 2 weeks is likely to take 4-6
quarters. We do not expect channel inventories to reach 2 weeks until early
1999 at best. Reduction of inventories requires OEM's to improve the supply
chain, and requires that OEM's stop channel stuffing.
e) If OEMs reduce channel inventories, it by definition require sales out of the
channel to be stronger than sales into the channel.
This is a mathematical fact, and has the potential to impact not only PC OEMs,
but also component suppliers.
K. |
