Jim, Here is Compaq's excerpted statement from its most recent 10-K that summarizes the kinds of channel risks you have been talking about, and which we have been seeing and will IMO continue to see.
Product Transitions. In each product cycle, Compaq confronts the risk of delays in production that could impact sales of newer products while it manages the inventory of older products and facilitates the sale of older inventory held by resellers. To ease product transitions, Compaq carries out pricing actions and marketing programs to increase sales by resellers. It provides currently for estimated product returns and price protection that may occur under reseller programs and under floor planning arrangements with third-party finance companies. Should Compaq be unable to sell the inventory of older products at anticipated prices, should it not anticipate pricing actions that are necessary, or if dealers hold higher than expected amounts of inventory subject to price protection at the time of planned price reductions, there could be a resulting adverse impact on revenues, gross margins, and profitability.
Bold type added for emphasis.
These worries are avoided by DELL since there are no channels, and component inventory is measured in hours, not weeks.
TTFN,
CTC |
