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

To: JRI who wrote (50367)	2/27/1999 7:21:00 PM
From: rupert1	Respond to of 97611

john: It seems that one man's "channel stuffing" is another man's "looking after the channel". What would you have said if CPQ had not responded to the VAR's demand for 3-4 week inventory and, as a result, CPQ/VAR's lost sales in the Decemeber/January period? My opinion, offered in the same spirit as yours, is that this whole "stuffing the channel issue" is one big false problem, which has become a cottage industry among protagonists. It is clear that a manufacturer which is not all e-commerce (like Dell) must maintain inventory and supply the channel. That is the nature of the business. Of course it has a cost, just as it has benefits. Problems arise if the manufactuer does not maintain enough inventory or if it maintains too much. Forecastng demand and supplying demand is an art not a science. If management gets it wrong by a few days - as they may have done this time - it is not a moral or fiduciary issue, requirng words like "trust" or "distrust". Morality and good faith enters the equation only if the channel is over-supplied deliberatley to present a false picture of the company's performance. The allegation is that CPQ did this in 1997/1998 for reasons having to do with share price and the DEC acquistion - I wasn't a shareholder then so don't want to comment. That's history. It was not done deliberately this time and the very light oversupply is not the only reason that January sales were soft. People are guessing that buyers are awaiting Pentium III and other new features - as they always do in January. Stuff in the channel will be sold at a discount, as it alway is. Intel does exactly the same thing as does every other manufacturer. There is nothing unqiue to COMPAQ in this distribution model. The company has said that soft demand in North America and Europe might conceivably cost the company 1 cent per share for the quarter. The 2 cents potential loss in connection with the Brazil Real has nothing to do with sales or supply or channel - it is entirely a matter of a depreciation of the profit earned in Brazil because of a depreciation in the currency against the dollar. There, that's my final tomato for the day, feel free to throw a few back. We are all trying to clarify the issues.