To: jim kelley who wrote (78216 ) 11/11/1998 3:45:00 PM From: Mohan Marette Read Replies (2) | Respond to
CPQ-'The devil is in the details'- A publicity stunt,nothing more nothing less.While the direct sales got the attention Wednesday, Compaq CEO Eckhard Pfeiffer was sure to emphasize that the Compaq is not cutting out resellers. Pfeiffer said the direct sales will complement indirect channels to give customers choices. "Many want to do business both ways," said Pfeiffer, who noted that 65 percent of PC sales go through resellers. "We want to make Compaq the IT vendor of choice in all categories." Mohan: Now here is a brilliant strategy if ever I have seen one. "Compaq, which its Prosignia product line, will undercut its resellers, but will offer a fee for referrals to buy direct. PC resellers will also offer technical support." Mohan: How is this for wishful thinking? "Compaq said it won't simply give up direct sales to Dell and other players anymore. Pfeiffer said Compaq plans to become a leader in direct sales. Officials also said they can top Dell's shipping time with deliveries within five days compared to Dell's seven-day benchmark." Mohan:This appears to be the battle ground and target. According to Access Media International, small and medium-sized businesses spent about $62 billion information technology in 1997, and that figure is expected to reach $120 billion by 2002. Mohan: How it won't work "Compaq officials said its strategy to target small businesses will utilize multi-channels and offer various services. Users can choose to buy direct from Compaq's site and get service warranties that would be carried out by resellers. Customers can also buy direct through resellers, which would act as "agents" and get a small commission." Mohan: Here is the deal. You see anything new here. 'Some analysts said Compaq's strategy is meaningful, but it isn't like the company just turned on a switch and decided to sell direct....... Mohan: Yeah this is the catch,execution. Don Young, an analyst with PaineWebber, applauded Compaq's strategy, but said he'd take a wait-and-see approach. "The devil is in the details," said Young. "It's execution and whether they can sustain prices." Mohan: Now haven't we heard that before,besides 3-week inventory won't cut it by a long shot. Compaq officials said they can execute and cut prices because inventory is under control and the company is operating efficiently. Pfeiffer said inventory has been reduced to three weeks and that the company is approaching "the sensitive limit where resellers are out of product." Mohan: You tell'em Cihra ..Cihra said prices aren't the real issue, costs are. As long as Dell and Gateway sell direct they will be able to take advantage of falling component prices. "You can price at anything you want, but as a shareholder I want to see the cost advantage," he said...
