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To: Dale J. who wrote (60527)	7/17/1998 2:44:00 AM
From: stak	Read Replies (1) \| Respond to of 186894

>>>Don't be shy to back it up if you are, I want to hear details. or are you just blowing smoke?<<< >>>Listen and you might learn something. Did it ever occur to you, that CPQ's statements could be deceptive without lying. If they didn't make anything on the high end PC's, then even a penny profit on their low PC end would make their statement true. However I would NOT conclude what you concluded below:<<< Go ahead, I'm all ears. Which part of Compaq's are deceptive without lying?

To: Dale J. who wrote (60527)	7/18/1998 12:15:00 PM
From: rudedog	Read Replies (1) \| Respond to of 186894

Dale - You need to separate CPQ's consumer business from the overall business to understand Schrock's statement. The consumer business is a 'company within a company' and does not share much of anything with the rest of CPQ. They have their own design, mfg and distribution. It has been a very good business for CPQ and made money even during 1Q and 2Q if 98, but it only represents about $2B of CPQ's $25B revenues in 1997. There are very few 'high end' products in the consumer line. CPQ's enterprise server and workstation business, which was about $7B in 97, was exclusively Intel based prior to the DEC acquisition. At about 40% GM it generated about twice the margins of the consumer division and about 15 times the margin dollars. Schrock was not comparing his low end margins with margins in these commercial products. The commercial desktop business, which was also exclusively Intel based except for a few specialty products, generated about $13B. I pointed out to you that DELL made over a billion in profit last year and DELL continues to focus on the high end. CPQ made only a 1 cnt last Qtr and only 2 cts this Qtr Although CPQ did suffer from a very poor choice on inventory position going into 1998 which forced aggressive price action in the commercial products (and ate up the profits in 1Q and 2Q), they still sell about 10 times the 'high end' volume as compared to Dell. Dell is 'skimming the cream' in this segment and will have a hard time getting real enterprise penetration without a service business.