Interview with Mason:
Compaq CFO Says Sales Out Key To Q2
By Joe Wilcox
Houston
6:33 PM EST Wed., July 15, 1998
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Compaq Computer Corp. Wednesday squeaked by Wall Street's
predictions of flat revenues by announcing second quarter earnings
of $32 million, or two cents per share. Earl Mason, Compaq's chief
financial officer spoke with CRN Section Editor Joe Wilcox about the
second quarter and the company's future growth.
CRN: You beat your inventory estimate of four weeks, is that correct?
Mason: We had 3.5 weeks of inventory, which was lower than our
goal of getting down to four weeks at the end of Q2.
CRN: Could you put that in relation to your efforts with the Optimized
Distribution Model (ODM)?
Mason: I think that's a big piece of it. I think our focusing on sales out
of the channel as a key metric is important. I think it's important to the
industry, and I know the channel guys like it. It's an important shift to
measure the overall market share growth for the industry.
CRN: Have you found any difficulty with the large research-marketing
firms changing their measurement from sales in to sales out?
Mason: They're still on sales in, and that is something we have been
talking to them about. We believe the industry needs to focus itself
more on the sales out. It's really the right thing.
CRN: How do you see growth going forward, especially in the
enterprise market?
Mason: It's good. If you look at the sales out, we actually grew our
enterprise group 58 percent [in] units [from] 2Q 1998 over 2Q 1997.
That's pretty strong growth. So we feel pretty good about it.
CRN: Where was overall growth strongest?
Mason: I think, fundamentally, North America and Europe are sound
markets. Yeah, they're price competitive. This is a tough business
we're all in.
CRN: Did this offset weak sales in Asia-Pacific, where you had
negative growth?
Mason: Remember that actually 82 percent of our sales come out of
North America and Europe.
CRN: Is that the same as before the merger with Digital Equipment
Corp.?
Mason: Well, that is for Q2, so it is before the merger. After the
merger, I haven't figured it all out because we haven't had a full
quarter with Digital in it yet.
CRN: How do you view your growth in the small business market,
which is a big push area for Compaq?
Mason: You'll see us seeing some major gains there. It's something
we are focused on with our partners around the world. Obviously, it's
an area where Dell [Computer Corp.] has been very successful.
Obviously, as a team we have to deal with that.
CRN: Since you mentioned Dell, I understand the Deskpro EP has
consistently been priced the same or lower than comparable Dell
systems. Could you comment?
Mason: We have been competitively pricing against Dell, and with
the help of our channel partners, we have been wringing cost [out] of
the system. Of course, that has enabled us to do that.
CRN: How do you see Compaq wringing more cost out of the
system with ODM?
Mason: What we've accomplished in the last year is to establish a
base platform with the channel around ODM. And now there is a
whole constant set of improvements we need to make to make it
better than where we are.
CRN: Would you attribute any portion of your growth to great
efficiency versus sales?
Mason: Not at this point. We're growing two to three times the
market in North America. We have very competitive products out
there, priced right and promoted right at this point in time.
CRN: How are overall channel relations?
Mason: I think our channel partners, by and large, like the rules of
engagement as we laid them out, because they helped design them.
I think we're off to a pretty good start there.
CRN: Is there one thing the channel should get excited about the
second half of the year?
Mason: Well, we're looking at accelerated growth. They should feel
good about that and our keeping our inventory levels where they are
and not letting them going back up again.
CRN: How long do you expect to take completing the Digital
integration?
Mason: It's probably a 12-month affair. We're off to a very good start,
and we're pleased where we are right now. But we've only owned the
company for a little bit more than a month, so it's early yet.
CRN: Any major priorities for the integration as you go into the third
quarter?
Mason: The key thing is to get the sales forces as integrated as
much as we can as fast as we can, along with the manufacturing
plants.
CRN: How does your Web initiatives play into customer service and
ODM?
Mason: Well, it does. Obviously, the e-commerce sites we've put up
with our channel partners and our own e-commerce sites are
bringing more business for all of us right now and helping us transfer
more knowledge in a timely fashion. The whole set of Intranets and
extranets among our different partners are a key to our future
success.
CRN: If there was one message you would convey to the channel,
what would that be?
Mason: Thank-you for Q2 and help us again in Q3.
E.H.F. |
