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To: SecularBull who wrote (33562)	3/10/1998 7:06:00 PM
From: Geoff Nunn	Read Replies (1) \| Respond to of 176387

SP, I previously thought there were two forms of channel stuffing, but after reading your comment now believe there must be at least three! I submit all three versions can be inferred from various discussions on this thread. 1. In this version the seller chooses when to record end-of-quarter sales for accounting purposes. This seems to be not so much channel stuffing as accounting manipulation. It presumably occurs when there is growing inventory bloat, a concomitant, which it attempts to disguise. This, in a sense, is the most innocuous form of "stuffing" because in doesn't imply operating inefficiency as the tradeoff. 2. In the second version the firm counts in its sales product that hasn't yet been sold. For example, the firm may have sold goods on consignment. Paul Levy suggested this as a possible explanation of what CPQ may be doing. I believe he is right. I have read that CPQ has had agreements with resellers in which it is pledged to repurchase product which remains unsold beyond a given date. What I don't know is how prevalent the practice is. 3. A third version is the one you have suggested, in which CPQ uses aggressive price cutting to induce resellers to buy more product than necessary. Let me ask you this. If end-of-channel venders willingly buy additional product, albeit at lower prices, why should we regard this as "supply that they really didn't need" (your words). Assuming these venders are self interested, why would they buy product they don't need. It costs them money when they carry excess inventory. I guess I'm having a little trouble seeing this as channel stuffing if it's product the resellers asked for. Regards, Geoff