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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Geoff Nunn who wrote (31892)	8/30/1998 5:41:00 PM
From: rudedog	Read Replies (1) \| Respond to of 97611

Geoff - Interesting perspective. The question on the reseller pricing is higher than what? Dell does not sell into the retail channel. CPQ has much larger volumes in this space, larger than IBM and HP combined. HP admitted they could not stay in the game at CPQ's pricing and have had to give up competitive pricing, IBM was always higher than CPQ. So I don't see the empirical support for your thesis. CPQ apparently gets the higher GMs while still offering the lowest prices in the channel model. Some price protection is a pretty standard part of T&C in the retail market, and by extension to the channels that serve the commercial business. I agree that it would be desirable for CPQ to go to zero there, but it would be a first among the suppliers to those channels. The result is that CPQ will go direct to their largest customers (they have already announced this) eliminating both channel markup and price protection. Remember that CPQ now has 17,000 field sales and SE staff serving major accounts - about 10 times Dell's total field presence. In addition, CPQ has 25,000 highly trained professionals in the service organization. All of these people have the ability to sell CPQ product with none of the costs you discuss. The top 1000 accounts will see a greatly expanded CPQ presence with both sales and engineering depth, and with the ability to take the 20 points or so that used to go to the channel and give it to the customer (or CPQ) instead. This doesn't look like the ridiculously inefficient program or centralized, Soviet style pricing model you describe at all, it looks like the most efficient way to meet the needs of large enterprise customers. I wish Dell the best of luck going against CPQ in this space but I think they will need a lot more than they have to stay in that part of the game.