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

To: Flair who wrote (21991)	3/16/1998 8:31:00 AM
From: Roads End	Read Replies (2) \| Respond to of 97611

Flair...Here is the complete WSJ story. See the second paragragh EP quote. Steve Compaq Plans to Use Free Offers To Reduce Its Bloated Inventories By EVAN RAMSTAD Staff Reporter of THE WALL STREET JOURNAL Aiming to slash inventory at its distributors, Compaq Computer Corp. plans to offer free monitors and other accessories with its desktop personal computers for businesses. Separately, Compaq's chief executive officer, Eckhard Pfeiffer, said in an interview that he still expects the company to meet his $50 billion sales target for 2000. The goal, which would mean doubling 1997 sales of $24.6 billion, doesn't include the addition of Digital Equipment Corp., which Compaq agreed to buy in January. "I don't think the first quarter is going to throw us off," Mr. Pfeiffer said. Houston-based Compaq, the world's largest PC maker, announced March 6 that it expects to break even in the first quarter instead of posting the $500 million profit analysts were forecasting. The setback, Compaq's first since Mr. Pfeiffer became CEO and turned it around from a loss in the fall of 1991, was blamed on the need to slow production and cut excessive build-up in distributors' warehouses following an aggressive sales push in the fourth quarter. Compaq will initially lean more on accessory giveaways than deep price cuts. In early February, it cut prices sharply across its commercial line, cut monitor prices in half and offered to double the installed memory of some products. Now, distributors and other people close to Compaq say it will give away 15-inch monitors, valued at about $300 each, with its commercial desktop PCs and extend the memory promotion, which had been limited to high-end servers, to other units. A company spokesman Sunday said he couldn't confirm the details, but said an announcement is expected later this week. Compaq's consumer business, which represents about 15% of its overall sales, isn't suffering an inventory backup and won't be affected by the new promotions, dealers said. High product inventories reduce a PC maker's ability to change pricing and adapt to new technology. With new components always emerging, the value of a finished unit declines about one percentage point a week. Compaq and other dealer-oriented PC makers have been working to streamline manufacturing and distribution to bring inventories closer to the levels of direct sellers like Dell Computer Corp. and Gateway 2000 Inc. However, Mr. Pfeiffer said, Compaq's process changes have met technical problems and cultural resistance in the company and with dealers. "Going through this period here now will recrystalize the focus on execution," he said. "We will get there. There is no doubt in my mind of that." But he declined to say precisely how big Compaq's inventory problem has gotten and how quickly he expects it to be solved. Analysts estimate that Compaq products remain in dealers' hands from seven to 16 weeks. Some believe Compaq wants to reduce that time to three weeks by July; the company won't give a specific target. A trade publication, Computer Reseller News, reported that seven large dealers late last week had approximately 250,000 Compaq desktop units on shelves, far more than the 58,000 systems of International Business Machines Corp. and 40,000 of Hewlett-Packard Co. However, Mr. Pfeiffer said he doesn't believe Compaq's competitors hold that much of an edge and singled out IBM, whose price cuts to clear server inventories last month forced Compaq to respond. "In my opinion, IBM has gotten praise in the last few days it doesn't deserve."