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

To: hlpinout who wrote (77133)	1/30/2000 12:05:00 PM
From: rudedog	Read Replies (1) \| Respond to of 97611

hio - re: my comment Many people confuse direct delivery and configure-to-order with internet sales - the two are not the same. This is a VERY IMPORTANT point, especially with regard to CPQ. DELL manufactures on a BTO basis almost exclusively - even in areas where that model is not the most efficient. They have begun to depart from that model for their consumer model, recognizing that batch manufacturing in an essentially commodity business is lower cost - as shown by CPQ's profitable consumer business. DELL currently has a majority of their sales in the US generated on the Internet (although DELL counts anyone who even STARTS on the net as an internet sale, even when the final sale is done over the phone), but outside of the US, there is little internet sales. From an efficiency standpoint, there is not a lot of difference in cost of goods sold for a sale which is completely done over the net versus one where a sales person closes the business on the phone - eventually some manual intervention is required on each sale anyway and the telephone sales person is fungible with a clerk verifying an internet sale, from a cost perspective. In manufacturing and distribution, there is obviously a huge cost benefit to doing direct distribution versus working through a middleman - the 10% or so that the middleman lives on has to come from somewhere. That is as true in Hong Kong or Frankfurt as it is in the US. For years, CPQ has tried various schemes to determine and exploit value in "the channel" - service offerings, direct customer contact - but the reality is that as PC functionality becomes more a matter of getting it right at shipment and less downstream involvement is required, there is less and less opportunity for an external organization to justify its existence, and that trend will only increase as low maintenance legacy free machines come to dominate the commercial space. I think CPQ's current course on both overall product mix and distribution methods is pretty clean, they just need to execute.