Rudy, our posts seem to be whizzing by one another at too rapid a rate, so why don't you slow down just a bit so I can catch up. <VBG>
I would hope that the people on the Compaq thread are sophisticated enough to distinguish between channel inventory and Compaq's inventory. It is an important distinction, because it in effect allows the company to understate its problems. The reasoning is straight forward. If the channel inventory is 3 weeks, and the manufacturing inventory is six to seven weeks, it implies that the length of time to traverse the pipeline is about nine to ten weeks. In other words, components that Compaq purchases today will be sold to the final consumer in nine to ten weeks on average. Nine weeks in this business is a lifetime, considering how prices of components have plummeted, and that underscores one of Compaq's principal weaknesses. By contrast, Dell's number is eight days (soon to be reduced to five days according to CFO Tom Meredith).
But the problem is exacerbated by channel members holding obsoleted inventory. Those computers represent a drag on the market. Either they come back to Compaq (which would explain its relatively high COGS in the face of what you contend is a cost advantage) or they are surplussed in which case they cannibalize potential sales. In either case you are dealing with a very inefficient system.
TTFN,
CTC |
