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To: Geoff Nunn who wrote (48815)	6/23/1998 8:50:00 PM
From: jim kelley	Read Replies (1) \| Respond to of 176387

Geoff, I agree with your assessment. It looks like CPQ overbuilt in every channel including retail. The purpose is to grab market share. HWP and IBM took similar approaches trying to capitalize on their rivals' weaknesses. The result is that they shot themselves in their collective feet. DELL was barely affected by their zealous efforts. It is easy to understand the implications of stuffing retail stores with PC's. There is limited shelf space and the more product you put into a retail store the less shelf space will be available for your rivals products. It is a market share grabbing technique. The more display kiosk space you take the less that will be available for your rivals. For the corporate channels this may work in a similar way. The Lehman Brothers report for May showed 73 days of inventory in that Vanstar channel. Now that is a lot of inventory. A lot of effort has been made to obfuscate the actual situation in the channel. If CPQ really wanted to it could clear the whole matter up by stating the levels of inventory in the different channels. The BTO/JIT model does not suffer from this obfuscation.

To: Geoff Nunn who wrote (48815)	6/24/1998 12:48:00 AM
From: Geoff Nunn	Respond to of 176387

HP Continues to Excel in Sales (if not profit): By JIM CARLTON Staff Reporter of THE WALL STREET JOURNAL Hewlett-Packard Co.'s sales of home computers are continuing at a brisk rate with no letup in sight this year, a company executive said. "It's been a very strong start so far this year, and we expect to have a strong finish," said Chris Pedersen, H-P's world-wide brand manager for home products. Mr. Pedersen declined in an interview to quantify the rate of increase in sales. But according to estimates by ZD Market Intelligence, a market-research firm in La Jolla, Calif., H-P's share of U.S. retail PC sales more than doubled to 21.8% in the first quarter from the year-earlier period. That puts H-P near the top of that market, along with rivals Compaq Computer Corp. and closely held Packard Bell NEC Inc. Analysts say H-P, Palo Alto, Calif., has benefited from an aggressive rollout of its Pavilion line since entering the home market three years ago. Company officials say they are also being helped by positive customer feedback; a recent survey by ZD Market Intelligence showed H-P's rate of repeat purchases jumping to 72% in 1997 from 58% a year earlier. "What is helping us is a momentum effect," Mr. Pedersen said. The strong growth, however, has yet to deliver big profits in the PC business. The company shocked investors last month when it disclosed second-quarter earnings will fall about 20% short of expectations because of price cutting in PCs. Other companies, including chip giant Intel Corp., are under pressure as the market shifts to personal computers selling for less than $1,000. But H-P executives say they have intensified cost-cutting efforts, moves that analysts say should pay off in the long term. Meanwhile, analysts say industry profits are likely to remain under pressure through this year. In New York Stock Exchange composite trading Monday, H-P shares rose $1.125 to $57.25.

To: Geoff Nunn who wrote (48815)	6/24/1998 12:53:00 AM
From: rudedog	Respond to of 176387

Geoff - I did not mean to imply that CPQ is not going after market share. They obviously care a lot about that. What I was saying is that was not the driving force behind the sub-1K commercial computers, since they cost more than $1K to produce. Sell at a loss and make it up in volume? CPQ was desperately unloading inventory of those older products and market share was well down on the priority list at that point IMO. Rumor is that there is a different reason for the assembly plant investments, something to do with shifting production, but I have only been offered the bread crumbs and have not yet gotten an idea of the whole plan. I was told that it would be pretty obvious in the next few months. I've heard that before... I will admit that I have recently heard a faint quacking sound but I'm sure it's canadian geese.