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****Compaq To Lay Off 10% Of China Workforce 06/22/98
Newsbytes, Monday, June 22, 1998 at 15:06
HONG KONG, 1998 JUN 22 (NB) -- By Neil Taylor, IT Daily. Compaq Computer
Corp. [NYSE:CPQ] has announced that it will lay off 10 percent of
its Greater China workforce.
The announcement came just one week after Compaq finalized its
take-over of Digital Equipment. The combined company's new strategy
for Greater China was announced by Philip Yu; newly appointed
president of the Compaq Greater China Division.
"For Greater China, we're a bit luckier than the other divisions,"
said Yu, explaining that as the Greater China division was only formed
last July, it has had less time to build up excess headcount.
"The restructuring number is less than 10 percent of our merged
workforce of 1,000 people. Naturally there will be some job losses
in Hong Kong as well."
Yu said the combination of Compaq, Digital and Tandem, which Compaq
bought last year, would put the company in a far better position to
tackle the China market. Unlike other areas, the Greater China
operation, which Yu will control from his base in Beijing, will report
directly to Compaq's Houston headquarters. Other country divisions
report through their regional departments.
The announced staff cuts would be made across all three companies
in the coming year, Yu said.
He said the company planned to grow twice as fast as the rest of the
industry. He added that the combined sales of the new Compaq put it
at number one in Greater China in terms of volume, with a market share
of 8.7 percent.
"If we are to reach US$1.5-2 billion we're talking about 35-50 percent
growth, year over year. Naturally, on an average year you'll probably
be talking about 35 percent, but if the economy gets better, then
50 percent will be well within reach because of the leverage that
we will be able to get from the two companies."
One of the company's chief challenges in China will be the introduction
of electronic commerce. In the US, the company has already switched
its PC manufacturing and distribution model to on build-to-order,
and has already achieved its ambition of zero inventory. However,
China, with strict import controls and difficult logistics, will take
longer to develop its electronic commerce business.
"When it comes to zero inventory, it's hard for us to achieve, because
of the customs issue, because of the transportation issue. So we are
not going to achieve zero inventory within the foreseeable future,"
said Yu.
"Our goal at the end of this year is Compaq inventory of two weeks
and the channels inventory of less than four weeks. So totally, you
do not have more than six weeks of inventory together."
The arrival of direct sales over the Internet from companies such
as Dell and Gateway clearly trouble the company. "Believe me, this
system is going to get much better, because we have to be much better
to compete with direct vendor such as Dell," he said.
Two distinct divisions will handle Compaq's product sales. The
Enterprise Solutions group will provide solutions based around
Tandem's NonStop, Digital's Alpha and Compaq's own PC servers. A new
Volume Business division is being formed to handle general PC sales.
In terms of services, which was one of the prime factors in the Digital
purchase, Compaq will be split into three sections. These will be
the former Digital MCS and Tandem support divisions, named
Availability Services, and a new network and systems integration
services group, which will include Tandem's professional services.
The new Operations Management Services group will perform
customer-outsourcing work.
As previously reported in Newsbytes, the Digital brand name is to
be phased out, but not as quickly as previously predicted. Yu said
that products such as the Alpha Servers will continue to carry the
Digital brand "for the remainder of their useful life", which he said
is usually about five years. Meanwhile, Digital PC products, such
as the successful HiNote notebooks, will carry the Compaq brand name.
Yu predicted that the company was likely to get into joint-branding
deals with mainland companies in order to leverage the various
benefits of local firms. He admitted that Compaq couldn't afford to
absorb the losses typical to certain PC segments in the mainland.
The full integration of the three companies in China is likely to
take at least three more months. In Hong Kong, Tandem has already
been relocated to the Digital offices in Taikoo Shing, while Compaq
will follow in several stages over the next few months until its
current lease expires.
The company is to open an entirely new office in Beijing, while
retaining existing Compaq offices in Guangzhou, Shenyang and Chengdu.
Shanghai and Taiwan offices are yet to be confirmed.
Reported by Newsbytes News Network newsbytes.co
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