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

To: Steven N who wrote (35654)	11/2/1998 6:39:00 AM
From: Steven N	Respond to of 97611

November 02, 1998, Issue: 225 Section: End Cap -------------------------------------------------------------------------------- Silence Means Approval of Direct Sales to Consumers Todd Wasserman Anyone tuned in to talking-head shows or talk radio in recent weeks has no doubt heard the braying of William Bennett. Bennett, who is hawking his new book, "The Death of Outrage: Bill Clinton and the Assault on American Ideals," makes the case that the American public should be more offended by Clinton's recent shenanigans in the Oval Office. I bring up Bennett's name because no equivalent figure exists in computer retailing. When Compaq Computer and Hewlett-Packard started making direct overtures toward consumers recently, the vacuum of voices opposing the relationships was telling. Compaq's new advertisements in national publications are as straightforward as a road sign. "Why should I buy a PC directly from the world's best-selling computer company?" asks a Compaq ad in the Sept. 29 edition of The New York Times. "Because you can," it answers. "Not only can you visit your favorite retailer, but you can also call us directly or buy online." An ad in the Oct. 12 editions of Time and Newsweek prompted customers to "Buy direct from Compaq," or visit the company's Web site. In smaller type, the ad reads, "Or if you prefer, call 1-800 AT-COMPAQ for a reseller near you." HP, meanwhile, last month began expanding its online "Shopping Village" site to include new PCs. The site previously sold only refurbished machines. Compaq and HP have valid reasons for their actions. As the price points for consumer systems drop, high-end PC sales are going to direct sellers like Dell Computer and Gateway. Build-to-order addresses this competition somewhat, but BTO has not yet proven itself at retail. "The direct channel is growing faster than the retail channel, and for us to totally ignore that and say we don't want to participate in it didn't make good business sense from our standpoint," Mike Larson, vice president of sales and marketing for Compaq, said in a recent interview. "At the end of the day, if you asked the retailers, 'Would you prefer that Compaq not be selling any [PCs] direct?' I'm sure every one of them would say, 'Yes,'" Larson said. "But if you asked them if they understood why Compaq is doing this, I think they'd all say, 'Yes.'" Shen Li, director of HP's consumer channel, had a similar response. "With respect to retail, it continues to be our preferred channel," he said. What's missing is the other side of the story. Executives from CompUSA, Best Buy, Micro Center, et al., have been silent about Compaq and HP's direct ambitions. Perhaps those retailers are too busy worrying about other aspects of the business, such as PC deflation, to mount opposition. Maybe Larson is right, and they are sympathetic enough to exercise tolerance. Either way, the message to other PC vendors pursuing the direct model seems clear: Come on in, the water's fine. Copyright ® 1998 CMP Media Inc.

To: Steven N who wrote (35654)	11/2/1998 6:47:00 AM
From: Steven N	Respond to of 97611

November 02, 1998, Issue: 814 Section: Small Business -------------------------------------------------------------------------------- Viewpoint: Fair Compensation Seen -- Compaq's Direct Push More Friend Than Foe Herman Mehling Houston -- The chairman of Compaq Computer Corp.'s small- and medium-business advisory council is staying focused on the positive as the vendor enhances its direct programs with small-business customers. Steve Harper, president of Network Management Group, a Compaq-authorized reseller based in Hutchinson, Kan., would not give more details about the program, citing a nondisclosure agreement he signed with Compaq. But he said he considered the program to be "channel-friendly." Houston-based Compaq plans to extend its direct-sales efforts to small and midsize companies beyond its current DirectPlus program, channel sources said. DirectPlus is a catalog-based program that offers a limited range of products and provides agent or referral fees to resellers. Compaq's DirectPlus, which accounts for less than 5 percent of its small-business sales, is reseller-friendly, said Michael Pocock, Compaq's vice president of North American sales. "We are getting killed by Dell [Computer Corp.] and the no-name brands [in small business], and we need a way to address this without alienating the reseller," he said (CRN, June 22). Compaq sees DirectPlus as a way to drive product sales to companies in second- and third-tier cities that want products faster than local resellers can deliver, Harper said. The new direct-sales program might be unveiled this month and is likely to include a new product line designed specifically for small and midsize businesses, sources said. While the new line would be marketed and sold to small- and midsize-business accounts by Compaq direct-sales reps, resellers also would have access to the new products, according to sources. Compaq may pay an agent fee to resellers that refer customers to the direct program, sources said. Harper said he was surprised about Compaq's openness in inviting the advisory council to Houston for an open-dialogue meeting about the program. "Compaq took some of our recommendations, treating us like a real advisory council," he said. "I think the program will be an acceptable one for the reseller channel, and resellers will get fairly compensated for referring customers to Compaq." Harper said he accepted the reality that direct pricing would lower his margins. "Why should I get upset with my channel partner for doing what Dell is doing while Compaq compensates resellers and Dell does not?" he said. But even as Compaq explored more direct sales to small businesses, it was expanding the role of enterprise partners by launching the Enterprise Solution Provider Program. JOE WILCOX & CRAIG ZARLEY contributed to this story. Copyright ® 1998 CMP Media Inc.