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

To: Elwood P. Dowd who wrote (94420)	12/22/2001 12:31:20 AM
From: Captain Jack	Respond to of 97611

Missed that El,, but Ruckeyeser is the biggest bull on WS. Actually, he never goes even slightly bearish. The FED would give him a medal but he has printed AGs mistakes as well as his good moves and AG does not believe he is capable of making a mistake... besides-- there are many not assoc with WSW that are bullish on cpq.

To: Elwood P. Dowd who wrote (94420)	12/22/2001 6:18:27 AM
From: hlpinout	Read Replies (2) \| Respond to of 97611

El, I think the person you are referring to is Barbara Marcin with Gabelli who has been positive on Compaq for awhile but I believe last night it was Alison Deans. -- CRN Interview: Jim Milton, Compaq By Craig Zarley CRN - 1:34 PM EST Fri., Dec. 21, 2001 Jim Milton, senior vice president and general manager for North America at Compaq Computer, outlined the vendor's evolving SMB strategy and RESPONDED TO charges that its PC business threatens the viability of its merger deal with Hewlett-Packard in an interview with CRN Industry Editor Craig Zarley. CRN_ At the end of the third quarter, Compaq said 65 percent of its access product business was through direct distribution. Has that number changed for the fourth quarter? 'I'm really pleased that Dell has such a good handle on my costs, and it's extraordinary they could make that claim because clearly they don't know. . . . We are a manufacturer and an innovator. We are an engineering company. We are not a one-trick pony.' MILTON_ Our go-to-market strategy [in SMB] is a multi-channel or hybrid distribution model. The vast majority of business is through partners of some type. Sixty-five percent of our access business is direct, but that includes Partner Direct and agency fee business. In GEM [government, education and medical], which is our largest direct business, in Q3 over 80 percent [of sales] had an agency fee associated with it. Water is finding its natural level. We are starting to get a healthy mix of fulfillment vehicles. What we are trying to do is reduce the costs and move to a one-touch model in access and in our server business. Value is rising to the top. We're not so hung up on the direct-indirect mix. CRN_ At the Raymond James/CRN IT Supply Chain Conference earlier this month, Dell presented statistics showing that Compaq's costs will rise as more of its business goes direct. Have your costs increased as you've shifted more business to direct fulfillment? MILTON_ I'm really pleased that Dell has such a good handle on my costs, and it's extraordinary they could make that claim because clearly they don't know. Compaq spends 4 percent of revenue on R&D. We are a manufacturer and an innovator. We are an engineering company. We are not a one-trick pony. Our friends in the other part of the state are a one-trick pony. They are essentially a distributor. For them to categorize the cost of our various go-to-market vehicles is unbelievably presumptive. There are different cost models for different fulfillment vehicles, and we understand that. And it's one of the reasons why we are a hybrid distributor, using two tiers. Tech Data and Ingram Micro are very efficient and very good at what they do, and we want to work with those folks,unlike Dell, which is direct only. The hybrid distribution model, over time, will win. CRN_ But what about Dell's contention that Compaq's SG&A expenses are rising? MILTON_ An apples-to-apples comparison of Compaq and Dell would not be appropriate unless you compared only one part of our business,access products,and removed the higher-margin sales of Compaq's high-end storage and server systems and services, which typically take longer to sell but deliver greater margins. A hybrid go-to-market approach leveraging our solution providers, reseller partners, referral partners, retail and the direct channel is a very effective strategy, particularly among SMB customers, who view Compaq and our valued channel and reseller partners to be trusted IT advisers. We take a more comprehensive approach than Dell in exceeding customer expectations while driving down costs in the process. We have built a distribution model that is focused around the customer and how they want to do business with Compaq. CRN_ Walter Hewlett says the HP-Compaq merger deal overexposes the companies to the low-margin PC business. He thinks HP should exit the deal. Is that a valid argument? MILTON_ Clearly, both Compaq and HP are disappointed in the position that Mr. Hewlett took. The position that he is taking is seriously flawed. If you look at the reasons for the merger in priority order, the integration of the PC business falls at least third. Ahead of that is the fact that both companies are trying to scale into the enterprise across servers, storage and software, as well as build more critical mass in services. And, by the way, it does have a positive impact on our volume business. Also, [the third quarter] was probably the worst quarter in the history of the desktop industry. We were starting from a low watermark when Mr. Hewlett made that statement. CRN_ Are market development funds for the channel going to increase next year, given the reductions Compaq made in the fourth quarter? MILTON_ One of our objectives is to get a little more prescriptive in our funding, as opposed to horizontal and generic. For example, we're funding Tech Data and Ingram Micro behind the scenes through their networks of resellers. We will become more prescriptive in the rebate and MDF process as we go forward into 2002. It's our intent to grow that engine.