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To: Mohan Marette who wrote (53035)	7/22/1998 8:10:00 AM
From: Glenn D. Rudolph	Respond to of 176387

IBM has resellers build PCs in bid to cut backlogs Reuters Story - July 22, 1998 01:59 %RET %DPR %US %BUS %CORA IBM CMPC ICO DELL CPQ HWP V%REUTER P%RTR By Eric Auchard NEW YORK, July 21 (Reuters) - IBM on Tuesday said distributors have begun assembling all the key components of its commercial personal computers, a major shift aimed at holding down excess inventory and accelerating the company's profit growth. The new system is meant to prevent a replay of the glut of unsold corporate PCs at International Business Machines Inc. and other companies that clogged the market earlier this year, setting off a price war that has strangled IBM's overall earnings growth this year. IBM's ability to quickly turnaround PC inventory is considered a crucial requirement if IBM is to meet Wall Street's expectations for accelerating earnings growth later this year. IBM on Tuesday said it authorized two of its 16 current resale distributors -- CompuCom Systems Inc. and InaCom Corp. to assemble all PC parts -- including Intel processors -- in IBM PCs, custom configured to customer orders. The move is a milestone in IBM's years-long effort to transform its PC business to allow purchasers to custom-order products to their precise specifications, eliminating the need for IBM to produce vast amounts of pre-built PCs in advance. Like many computer makers, IBM relies on a network of local and regional distributors such as CompuCom and InaCom to handle many customer functions, including sales ordering, final product assembly, installation and service. IBM spokesman Tim O'Malley said the program would have a major impact on the computer maker's capacity to control inventories and become more aggressive in cutting prices as the cost of high technology components continues to fall. "This gives IBM and its resellers the opportunity to build what customers want at a point closer to the user," O'Malley said. IBM's move to a more direct means of PC assembly also helps it combat some the competitive inroads of direct distributors such as Dell Computer Corp., which turns around orders in an average of seven days and carries next to no excess inventory. Under IBM's previous manufacturing system, IBM shipped PC boxes with core components to distributors who added software and optional hardware like modems and computer memory chips, who must wait to see which products customers choose to buy. The old business model -- widely embraced by PC industry giants IBM, Compaq Computer Corp. and Hewlett-Packard Co. -- relied on the cleverness of market forecasters to predict customer desires, creating vast amounts of unsold inventory. Under the old standardized production model, large amounts of unpopular or outmoded product were an inevitable result. To maintain its relationships with distributors and prevent large build-ups of inventory in sales channels, IBM has been forced periodically to slash prices on old computer models, hurting its profits. In addition, it offered resellers 100 percent "price protection" on old models, meaning that IBM typically swallowed the cost of unsold inventory. Under channel assembly, IBM said it would offer its partners price protection on components for only 15 days, an incentive to the distributors to turn around custom assembly orders in two weeks or become stuck with the bills for unsold goods. As a further incentive to distributors, IBM has agreed to pay a 2 percent rebate for each PC assembled to compensate them for the additional manufacturing assembly investments the distributors must make to meet stringent IBM quality rules. The new program is a linchpin of IBM's Advanced Fulfillment Initiative (AFI), a broad set of steps aimed at increasing distribution chain efficiencies and offering more competitive pricing to customers. In time, from 60 to 70 percent of all personal computer products built by IBM will be assembled by distributors under this program, an IBM spokesman said. In the remainder of its business, IBM will continue to pre-build standardized PC models for customers who do not require custom features. Earlier this year, IBM commercial PC inventories climbed as high as 10 weeks, but the company reported in its second-quarter results that it had made substantial headway in reducing this inventory to about half that time and planned to make further gains as channel assembly becomes widely used.

To: Mohan Marette who wrote (53035)	7/22/1998 9:42:00 AM
From: K. M. Strickler	Read Replies (1) \| Respond to of 176387

MM, >> Obviously one of them isn't English.<gg> << That will be her 14th! I understand her Chinese (3 dialects), Japanese, Korean, Russian, German, French, Spanish, Italian, Hindi, Swahili and Portigese is marvelous! Give her a break! As for day - I kinda like it when Green-spam drops the market. He feels good that the market isn't running away, and that he has 'control' over it, the MMs get a chance to 'pay the bills with somebodies money', the market gets a breath and the anal-zits get to say 'see, I told you so', the bears get a chance to 'pontificate'. Now it is over for awhile, and we can get on with the task at hand - which would be - ah - let me see, Oh, yes, that would be MAKING MOOLA! (Who's the 'engineer' this morning? Kemble, Venkie, Sig, You? Maybe MIKEY!) Regards, Ken