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

To: Steven N who wrote (90323)	3/16/2001 7:50:02 AM
From: rudedog	Read Replies (2) \| Respond to of 97611

Steven - that is a much different statement than the one kaka made, which suggested CPQ had changed it's stance on PC pricing. The way I read this is that CPQ is accelerating the shift to enterprise products by further consolidating PC operations. If CPQ reduces their overall costs by paring back PC operations and uses the money to protect their server position, that is smart and fits with the strategy I have heard consistently over the last few months. CPQ does not have the kind of liability in servers, either in the manufacturing or distribution side, that they have in the PC space against DELL. There is little benefit in the PC space from CPQ's technology capability. The plan there seems to be to aggressively reduce costs and maintain profitability, and let share do whatever it does. CPQ is still the largest producer of PCs so it's not like they are going out of business there, but they are not going to let that business be a millstone around their enterprise side. In the volume server space, they have some vulnerability on the low end to DELL, who seems intent on turning that segment into just another PC business, with PC margins, but with bigger boxes. As the market share numbers show, DELL's strategy has not worked in the 4-way and 8-way space but has been effective, on a units basis, in the 1 and 2 processor small and medium business segment. I would expect CPQ to take a similar strategy in the low end server space to the one they use in their PC segment - go with the flow, reduce costs and shift to the commodity model with lower R&D. They can then use their R&D capability to pump up the higher end products, where services and high touch are still requirements, and where there is no particular advantage to the DELL model.