This is partly about the channel, but I believe there's much more at stake. To focus on the current inventory problems that have been acknowledged seems shortsighted to me. I bought Compaq because they have the necessary ingredients for the next level of success in the enterprise. Will they capitalize on those ingredients? Will they solve their current inventory problems? I think the probabilities are high enough to make the potential worth the risk.
The first step towards solving a problem is to admit it. You've heard compaq refer to the channel as a drug. It's easy to meet/exceed earnings based on a distribution point that you control. Problem is, it gets in the way of maximum efficiency and enabling you to meet/exceed expectations based on pure success. Compaq has admitted as much, and addressed the problem. That's quite a positive sign. They've also recognized the value of Tandem clustering/redundancy technology & an opportunity that really seems to be overlooked in DEC.
Yes, DEC provides an entry into parts of the enterprise market. DEC provides a huge service organization. DEC also brings a lot of baggage. What I don't hear people really talking about is the upside potential of Compaq competing with Intel as well. People tend to discount the Alpha, thinking that Intel has an unbreakable monopoly on CPUs. I believe that the longer term trend is going to be towards CPU independent software where CPUs compete solely on price, power consumption, reliability, and performance. Since Windows (WinCE, Win9x, or WinNT) already runs on many CPUs, there's already a rich, cross CPU API available & real applications that use it. For applications that don't yet support Alpha, NT has an x86 emulator. Alpha's also fast, scalable for MP, and reasonably cheap. The problem with Alpha has, to date, been DEC's continuous mistakes, not its lack of competitiveness.
Compaq has made it clear that they want to become the enterprise computer company. I believe they're ahead of DELL in developing the capability of really handling that task, but still way behind IBM in enterprise penetration, even with DEC. Have they executed perfectly? Obviously not. Have they made a fatal mistake? I don't think so. Are they addressing their known problems? It looks like it.
I think that Compaq will soon announce their restructuring plan and more will make sense. If their plan really does make sense to analysts, I don't think we'll see the low twenties again.
Then again, there's the market which may turn and keep us down for a while.
Mike |
