Interesting article....though not sure about it's overall effect...but interesting none the less...
Compaq 're-evaluation' raises eyebrows
Margaret Kane
02/23/1999
ZDNet News from ZDWire
Copyright (c) 1999 ZD Inc. All Rights Reserved.
Compaq's ham-handed cut-off of several online PC sellers has industry insiders speculating on
the reason.
Selling on the Web can be hard -- especially if you want to sell Compaq Computer Corp. PCs.
Compaq (NYSE:CPQ) today confirmed that it has stopped some ten online resellers from selling
its Presario line, and said today that it is "re-assessing" its strategy with regard to Internet sales.
Compaq sent the resellers an e-mail on Friday, informing them that they were no longer allowed
to sell Presarios, pending a review.
Industry sources say Compaq's strongest channel for its consumer systems -- mainstream
retailers -- were growing increasingly uncomfortable with the slash-and-burn pricing tactics of
Internet retailers.
Compaq officials would not specifically comment on whether pricing was a factor in the decision,
though the "re-authorization" applies specifically to companies that sell exclusively online. A
Compaq spokesman said only that "we felt at this time we needed to step back and evaluate [the
online] channel's needs and requirements."
Compaq unaware
A spokeswoman for CompUSA Inc. (NYSE:CPU) said she was unaware of any pressure placed
on Compaq by the big retailer. CompUSA's online business is not affected by the sales cut-off.
Compaq officials said the suspension affected "less than ten" online retailers, including Value
America, Cyberian Outpost (Nasdaq:COOL), CompuCom Systems Inc.'s (Nasdaq:CMPC)
PCSave unit and Buy.com (which is backed by Softbank Corp., the majority shareholder in ZDNN's
publisher, Ziff-Davis Inc.).
Compaq even suspended Shopping.com (Nasdaq:IBUY), an online retailer Compaq has agreed
to buy and merge into its AltaVista Internet media and electronic commerce unit.
"It's not so much a pricing issue for Compaq, it's volume. Those [offline] partners are saying
'you're allowing those ridiculous policies and you're trampling our feet,' " said Roger Kay, an
analyst at International Data Corp. in Framingham, Mass. "They need to keep these guys happy.
They need to do it on behalf of their partners."
Nonetheless, Kay termed Compaq's abrupt cut-off "graceless."
'Ludicrous'
At least one online retailer said it was "ludicrous" to think that Compaq would have been forced
into the move due to pressure from its channel partners.
But Darryl Peck, CEO of Outpost.com, did concede that it was possible that "some Internet
resellers were selling their stuff awfully cheap [might be] somewhere in their thinking."
Peck said that the company was notified Friday that it would no longer be able to purchase and
resell computers from the distributors Tech Data and Ingram Micro. But Peck said that he had
other sources of Compaq systems, and would continue to sell them online.
Compaq officials said they will spend up to the next 90 days reevaluating the online authorization
process.
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