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Technology Stocks : Compaq
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To: Jason W. France who wrote (21772)3/14/1998 1:09:00 PM
From: rudedog  Read Replies (1) of 97611
 
Agreed. also one of the reasons idc cuts the numbers so many ways is so every big subscriber can find numbers they like...

first question - Mike Lambert, who currently heads dell's server business, used to be the marketing vp of compaq's systems division. he clearly knows all of the issues around the server market and also where compaq is vulnerable. he and others at dell have done a spectacular job of developing and growing that business for dell and obviouisly handed cpq a big surprise. I believe that a big reason for the dec deal was to be able to differentiate against dell in this space. digital was a key MSFT partner and given m.dell's excellent relationship with redmond, cpq needed to make points with MSFT.

given that more than 30% of cpq's business comes from servers and that estimates are that servers have about twice the margin of the cpq average margin, then the answer to your second question would be that somewhere north of 60% of earnings come from servers. that's why the question of what inventory is really in the channel at the moment is so important. if it is servers or even a significant portion is servers, then cpq is hurting. but that would also be bad news for dell since cpq's server offerings are much more comparable to dell's (and I would say, probably a little better given hot plug pci and rack mount models). If cpq gets very aggressive on price they will hurt their own earnings but this will also hit dell in dell's highest margin, highest growth area. It will be interesting to watch this play out.
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