Seems to me the basic problem for CPQ is that by offering discounts/incentives to their major channel partners for the business market to make their aggressive Q4 sales targets, they've effectively moved around 2 weeks worth of 1998 sales into 1997. Now they could have gradually absorbed that throughout the year, but only at the expense of temporarily increasing their channel inventory, when they've been telling Wall Street since last June their ODM would reduce that inventory to 3-4 weeks.
So they've elected to take the hit all at once in Q1. It doesn't seem to matter what they do with the machines, since whether they sell them at firesale prices, or recall and rebuild them, they've already booked the sales into 1997 Q4. I agree with you that either way, the bulk of this inventory disposal will come off CPQ's 1998 sales and not at the expense of other vendors, particularly DELL, though they may make up some lost ground at the expense of IBM and HWP.
In any event, my take is "no effect on DELL", which was the point of my original post. My take also is that this is a hiccup for CPQ, and if I didn't already have a hefty core holding in CPQ, I'd be buying it like gangbusters today!
David T. |
