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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Night Writer who wrote (72808)	11/29/1999 4:35:00 AM
From: rupert1	Read Replies (1) \| Respond to of 97611

This is an old story (23rd) but I have not seen it posted. The new IBM direct advertisements in the UK caught my eye. They are full page ads on the quality broadsheets. The ads must be costing a lot of money, about $150,000 each. November 23, 1999 -------- WSJE: IBM Goes Online To Sell Its PCs, Servers In Britain By KEVIN J. DELANEY Staff Reporter International Business Machines Corp. began selling its computers directly to U.K. customers over the Internet and by telephone for the first time Monday and said it expects to roll out similar offerings elsewhere in Europe. The move comes as IBM attempts to turn around its troubled personal systems unit, where PC losses contributed to a $992 million (962 million euro) pretax deficit worldwide last year. And it follows IBM's decision last month to stop selling its Aptiva consumer PCs through retailers in the U.S., focusing instead on the Internet, where distribution costs are lower. The company said it has no plans for a similar shift away from resellers in Europe, where they handle IBM's retail sales. And it said the U.K. online offerings were intended mainly for a focused group of customers: small business and home office users. The products available include mid-range desktops and laptops and IBM's Netfinity servers. But IBM's online sales initiative does also have a consumer flavor, with a banner at its U.K. web site touting "New Christmas offers" and with Aptiva "home" PC and printer bundles priced as low as GBP 839, excluding value-added tax and delivery. It certainly wouldn't be bad news for the computer maker if it saw a broader migration of its customers toward direct online sales. It's not clear that the firm actually makes a profit on the PCs it sells through retailers. IBM loses money on every desktop sold that way in the U.S., according to one person familiar with the matter. And while the company wouldn't comment on its margins in Europe, price competition across the board is squeezing PC makers here too. Direct sales over the Internet allow vendors to cut costs by removing the middle man, the retailer, from the transaction. That's been one of Dell Computer Corp.'s chief weapons, as lower costs allow it to keep its prices low and still make a profit. The Texas-based computer maker has been on a tear in Europe of late, with its PC sales climbing 16% in the third quarter of 1999, according to Dataquest, a market research firm. 36% of its sales in the region were direct over the Internet during that period, with the rest done by telephone or by business account managers. Gateway Inc. and Hewlett Packard Co. also sell PCs online in Europe. While Compaq Computer Corp., the market leader, does not offer PCs directly over the Internet itself, its web site includes links to online resellers. IBM, which ranks fourth in European PC sales according to Dataquest, also has similar links on its site. IBM said prices for PCs sold through its web site would be similar, although not always identical, to those offered by resellers. It said this latest move was motivated by a desire to give its customers more options for purchasing IBM products. Analysts said the move was expected, especially given IBM's competitors' surging Internet businesses, and predicted it would not anger the resellers who could lose sales as a result. "They're being forced to do this now," said Andy Brown, an analyst at International Data Corp. in London. "It's not something that's really going to upset their channel partners."