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

To: Weekapaug who wrote (36887)	11/19/1998 8:57:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

Conspiracy theory of CPQ's share price. Victor _____________________ How Long Will Compaq be a Laggard? Despite the success of tech and internet-related issues and the apparent increased demand for computers, Compaq has remained the most noticeable laggard in the MCS portfolio. While tech stocks and, until the last week, fellow box-makers like DELL have made impressive gains, CPQ has hovered around the 30 mark and has noticeably lagged on days when tech has made big moves. Why? CPQ leads the league in company press releases, all of which tout good news. They have made significant acquisitions in the last year, the most important of which was DEC. They have even announced that they will now go head to head with DELL in the direct sales game. They even own one of the hottest search engines on the internet in Alta Vista. So what's the problem? Let's tackle these issues one at a time. Direct Sales-DELL has proven that this type of model is a goldmine. They don't have inventory problems because they build to order. They don't have huge, highly paid departments that cater to middlemen. They don't need them. They don't have to give retailers a cut because they don't use them. Why hasn't CPQ done this even faster? The answer is not obvious and is one that plagues many conventional companies that are now transitioning to the web. They have established distribution schemes and relationships with retailers that will basically be severed when they go to a direct sales model. Many have criticized CPQ saying that they should go for it now. I disagree. No matter how prolific e-commerce becomes, there will be a significant segment of the population that will still want to touch and use the machine they buy before paying for it. They won't know enough about computers to trust an internet purchase and will want to shop around in ways that aren't possible on the internet. CPQ is smart to keep a foot in this market, although the continued payments and incentives to retailers and resellers will be a drain on earnings that DELL doesn't have to worry about. They may be forced out at some point, however, as retailers are seeing the handwriting on the wall and manufacturing their own computers as evidenced now in COMPUSA. CPQ should focus its efforts on improving its web site to make it more user friendly as it offers a multitude of choices and pricing is not clear, at least to me, in terms of what the specs of the machine are. The use of AltaVista. This is one of the top five search engines on the net with millions of daily page views. If you go to the site now, you'd never even know it was owned by CPQ. This is a goldmine in terms of eyeballs, especially now that CPQ is playing the internet sales game. In addition, with all of the portals grabbing e-commerce partners and aggressively pursuing the "cybermall concept," this is a golden opportunity for the company that, as far as I have seen, they have yet to take advantage of. Perhaps they have plans, but instead of publicizing their "plays of the week," they should discuss them. Despite minimal initiatives such as "filter" deals and upgrading search technology, they have done little to associate their "brand" with AltaVista and that is the name of the game on the internet. If you asked 10 people on the street if the CPQ had anything to do with AltaVista, 9 of them would tell you no. Acquisition of DEC-According to recent statements by the company, this acquisition seems to be on track. This is probably the single biggest issue that will determine the long term future of CPQ. The unveiling of the Alpha servers last month was a good start, but many feel that despite the apparent synergy of the merger, it will detract from CPQ's core mission of selling computers. Here's the bottom line: CPQ has a history of misleading analysts. That's why the stock tanked early this year. In addition, rumors were flying a few months ago about "channel stuffing," a practice that provides incentives to dealers to take inventory off CPQ's hands which will then count as sold goods. This was never proven but the fact remains that they will have to prove that they can execute in the above mentioned areas before anyone will begin to believe in them. No one is going to buy based on what CPQ says, it will have to be in the numbers on a consistent basis. The stock won't move until then.