Compaq discontinues ProSignia line
By Joe Wilcox
Staff Writer, CNET News.com
September 5, 2000, 4:40 a.m. PT
update How does Compaq Computer spell R.I.P.?
P-r-o-S-i-g-n-i-a.
As previously reported, the Houston-based PC maker
today 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 EP series PCs,
shift some features to its EN corporate computing line, 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 directly. But considered another
way, ProSignia's departure is a step forward, as Compaq
maximizes distribution assets acquired from bankrupt
distributor Inacom and simplifies how it builds, brands and
sells PCs.
From the start, ProSignia 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-business customers opted for the better-known Deskpro EN or EP
desktops and Armada notebooks, even though ProSignia prices tended to be
lower and more competitive 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-sized businesses will be designated with the "S" extension, as in EXS.
Besides branding issues, ProSignia's disappearance underscores changes
Compaq has made to how it manufactures, distributes and sells PCs.
When the PC maker launched ProSignia in November 1998, it 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
on average a 6 percent fee for systems sold to their customers and the number of
direct sales failed to yield gains comparable to Dell, 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. In a shake-up that
sent former Compaq chief executive Eckhard Pfeiffer packing, the company
reorganized into three autonomous product groups: commercial systems,
consumer, and enterprise systems and services.
Longtime Compaq executive Mike Winkler took over the company's money-losing
PC business and spent a year cutting the fat out of manufacturing and distribution
and taking more business direct.
After realizing the company could not build the infrastructure it needed quickly
enough, Compaq acquired distribution assets from Inacom and from them
established the Custom Edge subsidiary under Winkler.
These changes brought Compaq's commercial PC division back to profitability in
the second quarter and increased direct sales 40 percent in the United States and
25 percent abroad.
With Custom Edge, ProSignia's efficient manufacturing approach, state-of-the-art
nearly two years earlier, paled in comparison. With five chassis and other design
differences, ProSignia no longer fit into Compaq's long-term PC goals. By
customizing Deskpro and Armada models for small businesses, Compaq hopes to
cut costs and boost margins.
"We're simplifying our manufacturing, we're lowering our supply-chain cost, and
we're making it easier for the customer to choose what's right for them," Compaq's
Baker said.
"This does not change at all the hybrid model, where customers choose how they
want to buy," she said. "We want to sell more products direct, but we also have a
whole network of partners that we want to continue to support, particularly in the
(small- and medium-business) market." Baker said about half those customers buy
direct and the rest prefer local dealers.
During the next few months Compaq will also retire its Deskpro EP line, which had
been targeted more at early adopters, and will reposition EN models with broader
features that have appealed to many corporate buyers, such as the EP's flexible
chassis design.
The EX series will offer the newest technologies and "S" models for small
businesses, Deskpro manager Baker said. Compaq also will introduce new EXS
models on a quarterly basis, much more frequently than Deskpro EN.
ProSignia's replacements will be available immediately. On the desktop side, the
entry-level Deskpro EXS, with a 566-MHz Celeron processor, 64MB of memory
and 10GB hard drive, sells for $699. The sweet-spot system goes for $1,034, with
a 733-MHz processor, 64MB of memory, a 16MB video card, a 15GB hard drive, a
48X CD-ROM and a network card. Both configurations come with a choice of
Windows 95 or 98.
Two Armada notebook models will be available initially. The Armada 100S, for
$1,099, packs a 533-MHz AMD K6-2 processor, 12.1-inch display, 5GB hard
drive, 24X CD-ROM drive and 56K modem. Compaq also offers the Armada
E500S, a more full-featured portable, starting for $1,000 more.
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