Mary, re: "My own feelings are that the Intel/HP alliance on the Merced has forced his hand - and he is declaring independence and will now grow through acquisitions and other means."
I don't think this decision has implications beyond trying to generate maximum sales and profits. Thinking from a product managers perspective, my guess is when they put together the line, they felt that people go out to buy the Compaq brand. If all the computers under the $1200. level have AMD chips, their assumtion might have been that the consumer will value the Compaq brand enough to stay in the line, and value the Pentium brand enough to pay more than $1200. (rather than $799. or $999.) If you can step up just 10% of consumers to a higher price point, your overall revenues go up and your overall GM's really go up (I know, I've done the spreadsheets, endlessly).
I'm not sure this strategy will work, I'm not sure that consumer will stay within the Compaq line. As an investor in both companies, I have mixed feelings.
Intel is still very important to Compaq, as Compaq is to Intel. They may not like each other, but they need each other.
John |
