Flair...Here is the complete WSJ story. See the second paragragh EP quote.
Steve
Compaq Plans to Use Free Offers
To Reduce Its Bloated Inventories
By EVAN RAMSTAD
Staff Reporter of THE WALL STREET JOURNAL
Aiming to slash inventory at its distributors, Compaq Computer Corp. plans
to offer free monitors and other accessories with its desktop personal
computers for businesses.
Separately, Compaq's chief executive officer, Eckhard Pfeiffer, said in an
interview that he still expects the company to meet his $50 billion sales
target for 2000. The goal, which would mean doubling 1997 sales of $24.6
billion, doesn't include the addition of Digital Equipment Corp., which
Compaq agreed to buy in January. "I don't think the first quarter is going to
throw us off," Mr. Pfeiffer said.
Houston-based Compaq, the world's largest
PC maker, announced March 6 that it expects
to break even in the first quarter instead of
posting the $500 million profit analysts were
forecasting. The setback, Compaq's first since
Mr. Pfeiffer became CEO and turned it around
from a loss in the fall of 1991, was blamed on
the need to slow production and cut excessive
build-up in distributors' warehouses following
an aggressive sales push in the fourth quarter.
Compaq will initially lean more on accessory
giveaways than deep price cuts. In early
February, it cut prices sharply across its
commercial line, cut monitor prices in half and
offered to double the installed memory of some
products.
Now, distributors and other people close to Compaq say it will give away
15-inch monitors, valued at about $300 each, with its commercial desktop
PCs and extend the memory promotion, which had been limited to high-end
servers, to other units. A company spokesman Sunday said he couldn't
confirm the details, but said an announcement is expected later this week.
Compaq's consumer business, which represents about 15% of its overall
sales, isn't suffering an inventory backup and won't be affected by the new
promotions, dealers said.
High product inventories reduce a PC maker's ability to change pricing and
adapt to new technology. With new components always emerging, the value
of a finished unit declines about one percentage point a week. Compaq and
other dealer-oriented PC makers have been working to streamline
manufacturing and distribution to bring inventories closer to the levels of
direct sellers like Dell Computer Corp. and Gateway 2000 Inc.
However, Mr. Pfeiffer said, Compaq's process changes have met technical
problems and cultural resistance in the company and with dealers. "Going
through this period here now will recrystalize the focus on execution," he
said. "We will get there. There is no doubt in my mind of that."
But he declined to say precisely how big Compaq's inventory problem has
gotten and how quickly he expects it to be solved. Analysts estimate that
Compaq products remain in dealers' hands from seven to 16 weeks. Some
believe Compaq wants to reduce that time to three weeks by July; the
company won't give a specific target. A trade publication, Computer
Reseller News, reported that seven large dealers late last week had
approximately 250,000 Compaq desktop units on shelves, far more than
the 58,000 systems of International Business Machines Corp. and 40,000
of Hewlett-Packard Co.
However, Mr. Pfeiffer said he doesn't believe Compaq's competitors hold
that much of an edge and singled out IBM, whose price cuts to clear server
inventories last month forced Compaq to respond. "In my opinion, IBM has
gotten praise in the last few days it doesn't deserve." |
