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

To: BillyG who wrote (24507)	10/27/1997 9:32:00 PM
From: John Rieman	Read Replies (1) \| Respond to of 50808

Buy IBM, get Acer? Do you know what low currency values in Asia will do to the trade imbalance? Ok, lets just sell parts to them.......... ijumpstart.com IBM Shifts Gears to the Low End After Money-Losing Third Quarter <Picture><Picture><Picture> Expects 60 Percent of Consumer Sales to Come from Sub-$2,000 PCs IBM Corp. [IBM] executives didn't respond to retail buying pattern changes quickly enough and are changing their strategy this quarter by pushing low-end products and outsourcing the majority of the consumer division's manufacturing and fulfillment. The company's emphasis will not be on high-end multimedia systems, which could leave the door open for competitors who want to make a stronger push in that market segment. Or, it may be an indication that retail vendors are willing to relinquish that product category to direct sales competitors, companies with lower distribution costs that can sell them for a profit. Jim Firestone, general manager of the consumer division, acknowledged that the emergence of the sub-$1,000 category took IBM by surprise. "We didn't anticipate it happening as quickly or pervasively," he said. Firestone would not say if the division is profitable, but several retailers who spoke with Multimedia Week said the company has been losing money on Aptivas priced above $2,000. As part of a fourth-quarter plan, Firestone and company are putting most of their eggs in the low-end E series (products priced in the $1,000 to $2,000) and expect that category to generate 60 percent of sales. The company is expected to ship its first ever $999 PC, the E16, this week at a few retailers. To cut costs, IBM is outsourcing manufacturing and fulfillment to Acer Inc. "If we're going to be able to compete effectively at these price points, we needed to take advantage of cost reductions and find a business model that was absolutely lowest cost," said Brian Connors, vice president of Aptiva. Historically Acer has had a much higher return rate than IBM, but Connors said IBM has systems in place to ensure quality. "We approve all components that go into the IBM systems," he said. "We've shipped quite a few [PCs manufactured by Acer] in Europe, and they're performing very well." Outsourcing Advanages? Michael Gale, managing director of market research firm Intelliquest, said IBM's outsourcing strategy sends a bad message. "Companies who historically outsource are showing a lack of commitment to the segment," he said. "I'm not convinced they're comfortable with it." When asked how the E series push would impact IBM's commitment to high-end multimedia systems with DVD, Connors said the company has simplified the fourth-quarter product line and will sell DVD models. Don't look for IBM's DBS PC, a system equipped with a satellite receiver, to hit the market for at least four months. Connors said lack of content is holding up for the product, (see MMW, Sept. 22,). He doesn't expect that market to mature until the second half of 1998. IBM next month will begin test marketing a build-to-order sales model in Europe with German retailer ComTech. Buyers can order systems from ComTech with the specifications they want. Based on the response, IBM is considering moving the initiative to the United States. ComTech began selling IBM PCs in Germany and Austria last month. Corporate Shuffle IBM's move to the E series comes in the midst of yet another company reorganization. Firestone said there are "no plans for buyouts of people in the consumer division," and that rumors of a consumer division demise were inaccurate. As part of the reorganization, the consumer products division will become part of the personal systems group, formerly known as the IBM PC Co., to amortize development resources. Brian Connors has taken on a greater role and will be responsible for all marketing and operations of the Aptiva business, a role previously shared by Connors and James Corcoran. Corcoran has changed jobs and is working on growing the consumer services and peripherals business. Aptiva development efforts now fall under the personal systems umbrella and are being handled by Al Mingo. (IBM, 914/766-3419; Intelliquest, 512/329-0808.)