Compaq not selling some "high margin" items anymore.
Fez
_______________________
Compaq To Retreat On Networking Front
(12/24/98, 10:55 a.m. ET)
By Joe McGarvey, VARBusiness
Compaq will begin to shut down manufacturing of networking products and dissolve engineering groups as part of a first-of-the-year plan to phase out its stand-alone network-products division, according to a story in The Wall Street Journal Wednesday.
The article further says the personal-computing giant, starting Jan. 1, will move its networking products, such as switches and routers, into its computer and services divisions.
The move marks a retreat by Houston-based Compaq from a segment of the computing market the company began to target more than four years ago with the purchase of Thomas-Conrad. In recent interviews, Compaq executives had trumpeted the company's push into networking as both a means of tapping into a potentially lucrative market and a mechanism for increasing the attractiveness of its PCs and servers.
According to Compaq officials, the availability of high-speed routers and switches in the company's product portfolio would enable enterprises to assemble end-to-end networks that were built and designed by Compaq. The appeal of an all-Compaq network, these officials said, would be to ensure enterprisewide systems, such as management software, directory services, and policy-based networking applications, could be understood by every component in the network.
Compaq officials, who categorized the pending move as a reorganization of the company's networking products, said Compaq would continue to focus on integrating the company's servers and networking equipment under a common management inteface. Instead of manufacturing the equipment internally, however, Compaq would continue to resell high-end switches and routers from network-equipment providers, such as Rochester, N.H.-based Cabletron Systems.
Tom Nolle, president of Cimi, a Voorhees, N.J., research company, downplayed the significance of the report. "I'm not sure folding products into other divisions is necessarily the same thing as backing out," he said. "Compaq is simply deciding it can't compete in the high end of the network-computing market."
According to Nolle, not taking on networking powerhouses, such as San Jose, Calif.-based Cisco, which holds a large share of the market for high-speed switches and next-generation routers, is a wise move. It makes more sense for Compaq, he said, to concentrate on low-end workgroup switches, which will complement the company's server products and have approach the same commodity status as PCs.
Analysts also suggested Compaq's relatively late arrival to an already crowded market hindered the PC maker's opportunities of establishing a wide indirect sales channel. Many of the VARs<Picture> that were selling Compaq's servers and PCs were already reselling networking gear from established vendors, such as Cisco and 3Com.
Compaq will continue to supply some networking products through existing reseller agreements with Intel, Cabletron, and others. |
