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

To: Elwood P. Dowd who wrote (84611)	9/4/2000 11:25:44 AM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

cnetinvestor.com Compaq to discontinue ProSignia line By: Joe Wilcox, CNET News.com 9/4/00 4:08:00 AM Source: News.com URL: cnetinvestor.com How does Compaq Computer spell R.I.P.? P-r-o-S-i-g-n-i-a. The Houston-based PC maker tomorrow will kill off its ProSignia line of small business computers and resurrect it under its popular Deskpro corporate PC and Armada portable brands. Compaq also plans to retire its Deskpro EN series PCs, shift EP models from high-performance to corporate computing and introduce a new desktop line: Deskpro EX. On one hand, the move is recognition of defeat: Compaq's failed attempt to re-engineer manufacturing and distribution by selling ProSignia largely direct. But looked at another way, ProSignia's departure is a step-forward as Compaq maximizes distribution assets acquired from bankrupt distributor Inacom and simplifies in a different manner how it builds, brands and sells PCs. From the start, ProSiginia confused Compaq customers, PC Data analyst Stephen Baker said. "It seems like an extra line Compaq didn't need," he said. "You don't need to have a million PCs. It was kind of confusing because they used ProSignia for both desktops and notebooks, and it was an old Compaq server line." Compaq's corporate line of systems, by contrast, segregates brands: Deskpro PCs, Armada notebooks and iPaq Internet appliances and handhelds. "It makes sense to work that Deskpro name," PC Data's Baker said. "They're moving more toward iPaq as well, and that gives them two pretty well differentiated lines." Compaq found that rather than buying ProSignia, many small- and medium-size business customers opted for the better-known Deskpro EN or EP desktops and Armada notebooks, even though ProSignia prices tended to be lower and morecompetitive with Dell Computer. "This is part of the whole simplification of our product line," said Lisa Baker, product director of Compaq's North America desktop group. "We really want to get some clarity around the brand and sub-brand. Within the Deskpro line we'll have a series of products called EXS, which is exactly what ProSignia is today. It's going to be easier for SMB customers to know what to buy." Under the Deskpro and Armada brands, models specifically targeted to small- and medium-business users will be designated with the "S" extension, as in EXS. Besides branding issues, ProSignia's disappearance also underscores changes Compaq has made to how it manufactures, distributes and sells PCs. When the PC maker launched ProSignia in November 1998, the company attempted a bold re-engineering of its supply chain, moving away from indirect sales through dealers to a more direct model similar to Dell's. The advantages of such a move meant lower manufacturing and distribution costs and thus higher margins on every system sold. But because Compaq paid dealers an average 6 percent fee for systems sold to their customers and the number of direct sales failed to yield gains comparable to Dell Computer, ProSignia, in some ways, created more troubles than it solved. In a recent report, Technology Business Research analyst Lindy Lesperance concluded the company's "mixed messages to its channel partners when it first embarked on its campaign to increase direct sales" hurt Compaq's standing with its dealers. Something else changed after ProSignia's launch: management.