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

To: Mohan Marette who wrote (20342)	3/7/1998 2:37:00 PM
From: Mike Gordon	Read Replies (2) \| Respond to of 97611

< if Dell is not in the Sub 1000 market,this seems unlikely,unless I am not getting what you are saying. Possibly a clarification might be in order.> What I'm saying is DELL only offered >1K boxes. CPQ offered both. New customers had the advantage with CPQ because of price, and just as importantly, the ability to try it in a retail establishment. Any experienced user, (experience gained from using a PC at work) would probably not buy a sub 1k PC unless they were forced to by economics. Then they relied on the reputation of the manufacture. Mohan, you've been on this thread longer than I have. What's your impression of Monday? Thanks Mike Gordon

To: Mohan Marette who wrote (20342)	3/7/1998 6:24:00 PM
From: Xpiderman	Read Replies (5) \| Respond to of 97611

Eckhard Pfeiffer Conference Call with Analysts Speaks Out On Q1 Shortfall Compaq Computer Corp. Chief Executive Eckhard Pfeiffer spoke about the company's sales and earnings shortfall for the first quarter in a conference call with analysts. Below are excerpts from the call. Q: Could you characterize the revenue shortfall? Pfeiffer: It is to some extent end user demand. We do not see the level of sales out that we had anticipated in the first quarter. It is not a product issue. There is plenty of product which is part of the cutback. We are not shipping into the channel more product only to make the quarter...We want to be fully operational with our ODM.(Optimized Distribution Model). It is not product. It is demand and inventory. Q: You talked about having to clear the channel of inventory. Can you talk about roughly where those levels are and what you need to get moved out? Pfeiffer: We have been on a pretty steep ramp throughout the second half of last year in essentially all product categories. That is obvious always in leading the demand curve and then you just watch the demand curve and see if this stays in line or if it starts spreading apart and you realize you have a problem. That is what we have been experiencing during the first part of the year...February was the key month to watch to make the judgment call, can we make it. As we saw more inventory in the channel we decided to cut back here and stay on our channel inventory reduction plan. Q: Can you give us any guidance on unit growth going forward? Pfeiffer: Well the end user demand numbers I think everybody agreed going into the year would be lower for 1998 than we saw in previous years. How the first quarter will actually come out can not be predicted at this time. It is certainly less than ... what we had in our internal plan. How it will play out for everybody else is obviously not known. Q: Have you seen any weakness in the server growth? Pfeiffer: What we said in general applies really across most product categories really pretty even. Q: You expect a cautious outlook for the second quarter. To what extent are dynamics affecting gross margins in q1 likely to extend into q2? Pfeiffer: It would not be appropriate at this time to label this a one quarter issue when we say we are driving the ODM to be at the model level by the end of the second quarter. In addition, the signs of lower market demand can not be read very well at this point. It remains to be seen whether additional pricing action (will help). As we have seen, frequently in the past, (pricing action) creates new waves of demand. So we are watching every signal we will be getting here and then we will have a better understanding of the second quarter. Q:Can you talk about the pricing pressure you are seeing? Pfeiffer: The pricing pressure is obviously on the desktop side and the server side and some of what we call the option area. The year over year number for North America...that is likely going to be down. Q: What type of pricing promotions are you going to do? Pfeiffer: We don't want to signal pricing actions in detail nor the specifics of promotion. Q: How long do you think it will take to clear up these issues? Pfeiffer: Well the programs will be underway real fast...We will have to see how this works out. Q: There are some conflicting signals out there relative to the demand picture...There are some resellers indicating sell-through has continued healthy. Can you address that issue? Pfeiffer: We kept emphasizing that we are talking about the commercial segment of the market and the channel that is predominately serving that. We see good growth in our consumer business in North America and really in all markets around the world...Our notebook business has been growing well. It is mixed and the main part of what we are discussing here is North America commercial (systems). Q: Are there any problems in terms of demand relative to plan or pricing in Western Europe in the commercial business? Pfeiffer: So far we have positive messages from Europe. We have stated we think demand is good (there). It is a global market that quickly adapts to any product that we do not ship to the North American channel. Q: Are you willing to directly answer the question about what you believe is happening in the overall end demand market including in the U.S. commercial market? Pfeiffer: On the demand side, the signals are Intel made their earlydisclosure...Everybody going into the year was talking about lower unit growth than last year or previous years. That is a factor. How much of it in the first quarter is not clear until the quarter is over. Our sales forceast certainly has been ambitious and we have been growing share quarter after quarter. Obviously we keep doing that...We will be more visble in the end user engagement. We will encourage our dealers to do a lot more direct business on their web sites. Compaq will be more active on that end. We will continue our aggressive market share strategy in the future. Q: How much do you think the sub $1,000 market has started to bleed over on to the corporate side? Pfeiffer: I don't think it is a bleed over issue. It is a critical price point for the consumer. On the commercial side it is the never ending striving for great entry level product that will be and are below the $1,000 price. As long as these can be produced at an acceptable margin then it exists in both segments of the market. Q: Can you state that you are committed to the DEC deal as much as you were on the day that you signed the definitive agreement? Pfeiffer: The answer is clearly yes