Interesting note from an investment bank..
: We view the exclusive distribution agreement as a large
customer win, but it needs to be placed in perspective. Tandy suggested
about 10-12% of Radio Shack's $3.2B in annual sales is associated w/
computers and related products, or about $320-$380M. Assuming $300-$350M
of it is PC's, this represents less than 1% of Compaq and DEC's Proforma
sales and likely much less of the profit stream. Also, at least a portion
of Radio Shack Presario sales will cannibalize other retail sales such that
the $300-$350M represents a ceiling in the first year or two. The agreement
is similar to the successful approach that Apple and CompUSA initiated last
quarter. Adverse affects on the direct vendors is unlikely. Gateway
country stores are still a much more efficient approach as it lacks channel
conflict, can effectively leverage the Internet without conflict, contains
zero inventory, are dedicated to PCs, carry larger PC dedicated floor-
space, and have a much more focused, and probably better trained sales and
service representatives. Similarly for Dell with the exception that Dell
has not adopted the country store approach. While on the margin a positive
development for Compaq, in the larger picture this agreement will provide
only limited incremental earnings. In the near-term, Compaq probably has
higher priorities and execution challenges. |
