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To: Chuzzlewit who wrote (47106)	6/10/1998 9:42:00 PM
From: rudedog	Read Replies (1) \| Respond to of 176388

chuz - I agree with what you say except that CPQ does not 'take back' product from the channel, and has never done so as far as I know. Sales are sales. The obfuscation was in the allocation of 'contra-revenue' related to the price protection, which was a dollars transaction that fell into COGS.

To: Chuzzlewit who wrote (47106)	6/10/1998 10:40:00 PM
From: jim kelley	Read Replies (2) \| Respond to of 176388

Cat, Re; Channel Stuffing I was referring to CPQ taking back the product even though it may not be required to do so contractually.( It is in their interest to clear the channel for new product.) I was talking with a person who managed the channel for a big company. He said that he would try to replace the obsolete product in the channel with twice as much saleable product. But then he had to take back the obsolete product and write it down. Dog is denying that CPQ takes back product but there is no evidence that it does not do this. Moreover, if CPQ has a million units of obsolete product in their warehouses then I think this is actually worse than if they had taken it back as part of an inventory swap. Why? Because it says that they not only stuffed the channel but they also stuffed the warehouses. This latter condition indicates a company whose manufacturing is out of control. The latest corporate channel report today shows CPQ with the highest channel inventory levels at 6 to 7 weeks. So the channels are still stuffed since the target is 3-4 weeks. The is a vexatious problem. Regards, Jim Kelley