Bill -
1) Have not heard much of anything about sales - things are pretty hectic at CPQ at the moment, with a new organization being announced by someone almost every day. I'll see if I can scout something up.
2) The first step CPQ took after the acquisition was to consolidate manufacturing operations. I believe that they will improve Digital's manufacturing costs. I also think that their base costs are already lower than Dell's, but they were giving it up in the channel. With the elimination of price protection they should pick up at least 8 or 9 points, which should allow them to remain cost competitive while still dropping more through to the bottom line. Dell did a great job of taking advantage of the inventory bloat and DEC merger confusion, but that is history now. I would expect 3Q and especially 4Q numbers to tell the real story about just how much CPQ has really given up to Dell, and it will be a different picture than we saw in the first half.
3) CPQ acquired a lot of great technology in DEC, along with some inefficient operations and a bloated middle management. But EP doesn't want to throw the baby out with the bath. He needs to be sure he can capture the full value of the assets in DEC. I understand that most of the layoffs will happen over the next 6 to 9 months as the new product structures are developed and the senior managers know who they will need and who is not contributing. This is not chain-saw Al. CPQ has the opportunity to create the company which defines how the game will be played in the next century, and they need to make the right moves, not just the expedient ones.
I am pretty happy with my shareholder value at the moment, including the shares I bought in June, which are up about 30% in 2 months. True, Dell is up about 40% over the same time span, but last week, before their earnings announcement, CPQ was ahead of Dell over this period (29% to 27%). Neither of these stocks is a slouch. I expect CPQ to be at or close to 50 by the end of the year, and I sure don't expect Dell to be at 200 (or 100 split adjusted) which is what would have to happen to make Dell a better investment at this point. |
