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

To: Eddie Kim who wrote (26820)	5/30/1998 8:23:00 PM
From: rudedog	Read Replies (1) \| Respond to of 97611

I have asked that question of several people and got the same answer each time. CPQ has a consumer business (presario) which produces a wide range of products, some under $1000. This product line has been growing better than 100% per year for a while and production has never caught up with demand. There would be no incentive for CPQ to discount this line since it is already sold out. Margins on the line vary somewhat but average about 20% according to my sources. BTW Jim Kelly's claim that these products are 3rd party drop-shipped are nonsense. These are made right here in Houston (as well as elsewhere) and I know some of the people who make them. Also each product in the consumer line is manufactured for a specific market window (usually 120 days long) and all of the boxes are made at the same time. This is the most efficient way to make PCs, even more efficient than Dell's model. Also the products are shipped either directly to the retailer or at most through one distributor. The story on sub-1K commercial desktops is different. These products were in fact inventory clearance and had very low margins by CPQ standards, some as low as 14% (which with contra-revenue means pretty much at cost). There are newer commercial products which will hit the market in June or July which were designed for this price point and have margins in the 25% range.