Compaq To Unveil Small Business Plan
By Craig Zarley & Herman Mehling
Houston
3:15 PM EST Thurs., Nov. 05, 1998
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Compaq Computer Corp. next week will introduce a line of PCs for small and
midsize businesses along with a new distribution model that could dramatically
alter the way products are delivered to end-user customers.
Compaq plans to sell the new systems both directly and through channel
partners, said channel executives briefed by Compaq. But there is not enough
margin in the new products for them to flow through the traditional two-tier
distribution model, the channel executives said.
That means distributors such as Tech Data Corp., Ingram Micro Inc., Pinacor
Inc. and Merisel Inc. likely will have a diminished role in selling and marketing
the new systems, the channel executives said.
Bob Fernander, Compaq's vice president of small- and midsize-business PC
products, declined to comment.
The new products and distribution strategy will be rolled out in New York on
Wednesday at an event that Compaq President and Chief Executive Eckhard
Pfeiffer is expected to attend, the channel executives said.
The new PCs will carry an aggressive minimum advertised price and be targeted
specifically at the Dell Computer Corp.'s Dimension line, said channel executives
briefed by Compaq. The new systems will be sold directly to small and midsize
businesses by Compaq sales reps (CRN, Oct. 19). The channel also will be able
to carry the line and sell it to end users but will get no price protection or returns,
channel executives said.
Compaq will pay agent fees to VARs whose customers choose to buy the new
PCs directly from Compaq, the executives said.
"I think the program will be an acceptable one for the reseller channel, and
resellers will get fairly compensated for referring customers to Compaq," said
one VAR briefed by Compaq.
Another corporate integrator familiar with the plan said prices contain enough
margin opportunity for VARs to take title to the inventory and sell it to their
customers. "We know what our margins will be, and it's just a matter of deciding
whether it makes sense for us or Compaq to carry the paper on the product," he
said.
But distribution executives said Compaq has not built enough margin into the
products' price for them to sell it to their VAR customers. "There is not enough
room for two-tier distributors to operate in this business model," said one
distribution executive briefed by Compaq.
"The only scenario that we see where we can play is if a VAR does not want to
give his customers' names to Compaq [in order to get the agent fee] and instead
chooses to purchase it through us," said the executive. "We don't expect a lot of
volume [from the new systems], but we will figure out how to support our VARs if
they want to buy through us."
VARs briefed by Compaq said they felt comfortable with the mechanics that will
allow them to participate in the new direct-sales initiative, but they still want the
new systems to be carried by distributors. One VAR said he hopes Compaq will
make certain models available through two-tier distribution.
"It makes sense for Compaq to do this as it already has assembly agreements
with Tech Data, Ingram, Pinacor and other distributors," said the VAR. "I would
welcome being able to buy select models from distributors."
Compaq likely will outsource some assembly of the new systems to contract
manufacturers, including the channel, executives briefed by the vendor said."It
makes sense to contract some of this assembly to the channel because we are
closer to the customer," said one channel executive.
But a distribution executive was skeptical the vendor can handle the distribution
logistics. "We can still do it a lower cost. We've always felt that to the extent
that a vendor can replicate our infrastructure at a lower cost, by all means they
should do so," he said.
And some distribution executives were still wary of the new sales and
distribution model. "We can participate as a backroom partner," said one
distribution executive. "But the general distribution flow of product has certainly
been altered and will have some impact on our business."
Pedro Pereira & Joe Wilcox contributed to this story. |
