Rudy, let me stick my pussycat paws in here. The inventories carried by CPQ according to the latest financials is $2,202, and the COGS is 4,406. Using a 92 day quarter this yields (2202/4406)*92= 46 days. This is the way inventory is claculated
That is only inventory carried by Compaq. That does not include inventory carried by the channels. The inventory consists of RM, WIP and finished goods.
By comparison Dell maintains slightly less than 8 days and Meredith announced plans to cut inventories to five days.
The inventories Drew was discussing were those owned by Compaq. Presumably a sale is a non-recourse event and the inventory is no longer of any concern to Compaq. However, the history of the company being what it is, channel inventories may still be coming back to haunt Compaq in one way or another.
In any case, I'm sure that Drew meant to underscore the fact that due to Dell's vastly more efficient operations it does not suffer the inventory exposure that Compaq does.
Drew also neglected to point ou another key difference in operating efficiency between the companies. Dell turns its cash over much more rapidly than does CPQ, allowing Dell to finance its growth through operating cash flow. By contrast, Compaq relies on factors to maintain its cash flow.
The list goes on and on.
TTFN,
CTC |
