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by: gjmarinc
74989 of 74989
May 7, 1999
Tech Stocks
Shares of Distributors Gain
As Compaq Prepares Strategy
By ANTHONY PALAZZO
Dow Jones Newswires
NEW YORK -- Shares of several computer distributors gained Friday after an analyst
said Compaq Computer is set to streamline its North American distribution strategy.
The overhaul will authorize four exclusive distributors to sell Compaq products,
according to Donaldson Lufkin & Jenrette Securities Corp. analyst Kevin A. McCarthy.
Earlier, Mr. McCarthy issued a research note that said the four distributors to be
announced Monday are Ingram Micro, Tech Data, Inacom and Merisel.
Others, such as MicroAge's Pinacor unit, privately held Entex Information Services Inc.
and numerous regional distributors, will be forced to source their products from one of
these four, Mr. McCarthy said in the note.
Shares of the four distributors named in the note each rose sharply on Friday in heavy
trading. Tech Data rose 2 1/4, or 8.7%, to 28 1/8 and Merisel was up 3/4, or 54.5%, to
2 1/8, both on the Nasdaq Stock Market. Ingram Micro was up 2 1/8, or 8.6%, to 26 7/8
and Inacom tacked on 15/16, or 9.4%, to 11 5/8 on the New York Stock Exchange.
Compaq edged up 1/4 to 34 7/8 on the Big Board.
Meanwhile, the Nasdaq Composite Index was up 23.30 to 2495.60 and Morgan
Stanley's high-tech 35 index was up 2.90 to 989.30. The Dow Jones Internet Index
added 2 to 254.60.
The four distributors will expand existing co-location facilities, allowing Compaq to
further reduce channel subsidies such as price protection, Mr. McCarthy said. "We
believe Monday's announcement is a positive for the four distributors named and for
Compaq as well," he said in the note.
Compaq plans early next week to make an announcement about its U.S. distribution
strategy, said spokesman Alan Hodel.
"Compaq has been in discussions with our U.S. channel partners to maximize and
enhance our distribution model," he said. "We expect the discussions to lead to
refinements in that model that will benefit Compaq, our channel partners and our
customers."
Compaq will make an announcement Monday at noon EDT, a Tech Data spokeswoman
said. She said the Webcast will be available through the Tech Data and Compaq Web
sites. A spokeswoman for Ingram Micro said simply, "Stay tuned." Officials at Merisel
and Inacom had no comment.
Compaq has been struggling to improve its distribution system to better compete with
Dell Computer's more efficient direct-sales strategy.
Recently, Compaq has been criticized for offering the same products at different prices,
depending on where they're sold -- through the Internet, traditional retailers and
resellers, or direct sales.
In his note, Mr. McCarthy said the co-location strategy to be announced by by
Compaq, dubbed U.S. Alliance, "is emerging as a successful formula for improving the
inefficiencies of indirect distribution."
Under co-location, Mr. McCarthy said, there is no field inventory, and distributors can
provide configuration services at the place of order, leveraging third-party products to
drive higher "revenue attach rates.".......
Posted: 05/07/99, 4:48PM EDT as a reply to: Msg 74988 by gjmarinc
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