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

To: The Duke of URL© who wrote (89273)	1/25/2001 11:41:46 PM
From: profile_14	Read Replies (1) \| Respond to of 97611

Duke, not to interject in an unwelcome manner, I just want to add that I have discussed the same question with IR a few months ago regarding the progress on headcount reductions. The answer that I got was that they were going to push responsibility for P&L downward and let those managers make the decisions. Moreover, in an environment where IT staffing was scarce, they would be careful in laying off folks since the expense to re-hire was at a premium. In other words, they needed to rationalize their operations. Moreover, the reductions that they wanted to make were in places with stringent laws (overseas) where it became prohibitively expensive to do so in short order. That does not negate the point, but it does deserve a follow up with IR at least as well as with Capellas during the upcoming analyst meeting.

To: The Duke of URL© who wrote (89273)	1/26/2001 3:46:52 AM
From: rudedog	Respond to of 97611

Duke - I probably don't have all of the answers... but my sense is that the profitability was more affected by Pfeiffer's hesitation to move away from PCs, and his unwillingness to make significant changes in the DEC empire. Until MC took over, DEC was pretty much unchanged - same org, same management. I thought I heard that headcount was down to the low 70s, but I can't find the reference. If that is accurate it is a cut of more than 10,000 since Capellas took over. In 2Q and 3Q, industry standard servers generated a 40% revenue gain on a 20% unit share gain. DELL's numbers, by comparison, were exactly opposite - they got only a 20% revenue gain from a 40% increase in units. CPQ had a 6 month lead on the market with 1U and they gained a lot of share in that space - but it is not a hard product to clone. In the 8-way space, CPQ had nearly a year on the market, and they still hold 60% of that business. Likewise the 4-way, where they have better than 50% of the market. I think the decision to manage for profitability rather than share inevitably results in lower share growth... especially in the commodity products. But I see Compaq's future as more differentiated on end to end offerings and the kind of integrated offerings that the competition can not match. HP could maybe claim the product breadth but they are so conflicted that they can not execute, and they don't have the services depth. I am pretty comfortable with the way the company is being managed. I believe they will be well positioned for the next round. Only Sun seems to be executing as cleanly, and Sun is in a very different place since they have no client business and can not do the end to end play.