Tonight's news is old news for those who have been paying attention:
At the same time, companies like Compaq have become victims
of their own success in pushing prices for consumer PCs well
below $1,000, a shift that is eroding profit margins and
forcing a tighter focus on costs.
But, while all those factors combined have resulted in a
difficult near-term environment for some PC makers, analysts do
not expect any of them to do lasting damage.
"Fundamentally there are some shifts going on and short-
term, there will be some winners and losers," said Bill Schaub,
vice president of research at Dataquest. "But it's a mistake to
look at this one quarter in isolation."One of those shifts is hurting Compaq, which is in an
ongoing struggle to reduce the amount of computers sitting in
"the channel" as inventory at resellers and retailers.
Direct sellers like Dell and Gateway 2000 Inc
produce machines in response to orders, removing the
possibility of an inventory backlog.
Compaq has missed several internal target dates to cut that
inventory to three weeks of sales to better compete with the
direct sellers and now plans to complete the project by June.
However, inventory levels are currently nearly double that,
industry sources estimate and reduction efforts will likely
entail a near-term slowing of deliveries by Compaq, a process
that may already be reducing its need for Intel processors. |
