You are assuming that if Compaq didn't get on the Sub 1k bandwagon, their PC business would have stayed stable. That is completely wrong. If Compaq did nothing, their market share would just evaporate, as other more nimble companies step in.
Joe, as I indicated in my last post the Sub 1k was inevitable, but CPQ didn't have to initiate it in the manner they did.
The real mess is the the "premium" high priced PCs, where most of the inventory problems happened. Just think about your "premium" PC from last year with $1,500 Pentium II 300. The same CPU is worth $250 now. Just think how much it costs you to have this PC sitting in your inventory for a month or 2.
But that is my point. CPQ recklessly initiated the Sub 1k market while having a $hitload of high end inventory. Price wars are a slippery slope and tough to climb out of. You really have to be careful about entering into them.
With IBM, HP, DELL and CPQ strengthening into an oligopoly, they had a good chance to reap some profit. Of those big four, it was CPQ that initiated the pricing pressure. The other three simply had to react.
Dale |
