Kealoha - Re: "What is CPQ's market share in the non-retail market?"
I cannot answer this exact question.
I believe Compaq's problem is quite simple. COMPAQ almost single handedly ENDORSED, EMBRACED, and STARTED the sub $1000 PC bonanza with their choice of the cheap Cyrix MediaGX machine back in February of 1997.
Once they started it, everybody jumped on the bandwagon, offering similar machines - although most were Intel based. When AMD put out their K6 and Intel responded with immediate price cuts, the race was on to sell anything and everything at the stampede prices approaching $1,000.
Compaq found that INSTEAD of developing a NEW MARKET SEGMENT in the $1000 or below range, they effectively dropped THEIR ENTIRE LINE OF PCS - Corporate and Retail - deeply downwards. Instead of having two discrete strata - sub $1000 PCs and >$2500 PCs, they found that they created a market where EVERY PC was headed to the $1000 range.
On top of that backfire, Compaq also came to the realization that their cost structures are way too high to make any money at all in this business. So, they jumped back in bed with AMD to get cheap K6's, giving AMD another opportunity to sell more K6's at even bigger losses. All for the glory of landing the top Tier 1 PC manufacturer!
Meanwhile, HP, and everybody else followed Compaq down the pricing curve so all PCs are rapidly approaching $1000 - and nobody who is swimming in this cess pool is going to make much money.
Dell, by refraining from wholesale price cuts - they have introduced controlled price reductions - is staying above this fray and making good profits.
Compaq thought they were cute in trying to capture the low end. The result was that Compaq put EVERY PC in the low end.
Low end means low (or no) profits.
Look AMD.
Look at Cyrix.
Now look at Compaq!
Paul |
