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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Rio Jangada who wrote (25121)	12/14/1997 9:26:00 PM
From: Meathead	Read Replies (3) \| Respond to of 176387

That article is premature in forcasting a pricing advantage. Here, from the same publication is the real reason those guys have a phantom pricing advantage that won't be sustainable. HP, CPQ and IBM have yet to tally up their true P&L from these orders. Countering Dell -- Channel to reap big PC dollars By Craig Zarley New York -- IBM Corp., Hewlett-Packard Co. and Compaq Computer Corp. are turning up the heat on direct competitors by moving funds into the channel that will allow resellers to match Dell Computer Corp.'s prices in competitive bid situations. The money, which will be controlled and administered by channel headquarters locations, primarily will be targeted at small- and midsize-business opportunities, said channel executives familiar with the plans. For months, major vendors have vowed not to lose business because of more aggressive pricing by direct vendors, channel executives said. But that approach only has been effective in large enterprise opportunities, due to the long cycle times often involved in the bidding process. But in day-to-day bidding situations involving anywhere from several dozen to several hundred systems, the cumbersome procedures in place to get a price variation from vendors is costing the channel business. "We'd be in a competitive bid situation with a couple of hundred units, and even if I'd give up my 4 points of markup, I'd still be 10 points off," said Mike Steffan, president and general manager of operations and distribution at Inacom Corp., Omaha, Neb. Inacom would then go to the vendor to get approval to match the direct vendor's bid, but the process would take four to five days, Steffan said. "By that time, either the deal was lost or the customer had time to go back to Dell and they would one-up the bid," Steffan said. "We can't wait. We've got to be able to say right away, 'Here's the deal' and make it impossible for Dell to respond." To correct the problem, vendors now are shifting funds, and the discretionary power to use them, to channel organizations, channel executives said. HP initiated the funding shift this past summer, but both Compaq and IBM now have responded with similar programs for the fourth quarter. One channel executive said his organization's initial allotment of money from HP was twice that being offered by Compaq and IBM. The HP funds were quickly spent, but the company poured more money into the program, he said. "They have vowed that they're not going to lose to Dell anymore," said the executive. Because both Compaq and IBM's programs are just now being rolled out, it remains to be seen how much funding will be allocated to each vendor's respective programs, according to the executive. Compaq and HP executives were unavailable for comment. IBM, for its part, is calling its special funding program "Close the Deal," said David Boucher, the IBM Personal Systems Group's vice president of channel sales. "It's a fourth-quarter special bid program that pushes the decision out to the channel," said Boucher. "It allows the channel to make the decision while they have the customer on the phone. We can't let the customer go or he'll switch to someone else. If the program works in the fourth quarter, we will continue it." Boucher declined to say how much money IBM was committing to the program. But he did acknowledge that IBM's procedures for matching competitive bids were too cumbersome. "We had an 800 number in place [to get pricing approval], but the other guys were more responsive," he said. "We need to have special bid money in place to manage quantities lower than 50 units." Copyright (c) 1997 CMP Media Inc. MEATHEAD