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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (119514)	4/21/1999 8:09:00 AM
From: Mike Van Winkle	Respond to of 176387

Internet is a business process change. Very few realize that what makes internet adopters competitive is that it is a strategic business process change. There are thousands of small strategic business process changes that are not as glamorous. Take for instance the idea of a virtual shipping company that does not own a single plane, train, truck, or automobile. It is able to do this because of superior business processes; they do it with information. The new competitive battlefield is on the landscape of business process change which has changed due to the information age. Dell gets it. Does CPQ? Do other investors? How do you spot a company that does not before it does a CPQ? Here is an article showing another casualty of management that is not business process oriented. Cheers Mike Compaq's Shakeup Provides E-Commerce Warning April 20 By Dick Satran SAN FRANCISCO (Reuters) - The ouster of Compaq Corp.'s hard-driving chief executive Eckhard Pfeiffer gives one of the clearest signs yet that the Internet has transformed the business landscape and the corporate boardroom. Compaq, the No. 2 computer company, has seen its profits squeezed in recent years as upstart competitor Dell Computer Corp. dramatically outperformed its bigger competitor by adopting more quickly to e-commerce. Compaq could be just the first of many companies to face reshuffling if they fail to adopt quickly enough, analysts said Monday. It could portend a new era in which those who fail to heed the warnings will fall. "It's critical for all chief executive officers to have Internet strategies on top of their radar screens," said Erik Brynjolfsson, MIT's director of E-Commerce and Marketing Research Project. "Unquestionably it's going to grow in economic impact." So far, the Internet has sometimes been viewed as having interesting possibilities for companies to build new revenues, a kind of outsider art for the corporate world. The Compaq case begins to illustrate, however, that there are penalties for those who fail to integrate the Internet into their overall strategy. Previously, computer maker Hewlett-Packard Co. and book seller Borders Inc. -- both criticized for laggard Internet strategies -- had opened up their top positions and cited the need for a stronger e-commerce focus. In both cases, the chairmen gave up the chief executive positions but sought their own replacements for the top jobs. But Compaq's is the first case involving an outright ouster. Compaq announced the departure of Pfeiffer, who had been president and CEO since 1991, Sunday and also said Earl Mason, chief financial officer since 1996, was leaving as well. The stock market's ebullient rally of the past two years has already placed Internet stock valuations at such a high level it will take years for earnings to match expectations. But while unrealistically high stock values are easy to dismiss, losing a competitive advantage to a well-placed Web upstart is much harder to explain to the board. The biggest challenge faces those who have built sales forces that will be made redundant by the Internet. "Companies like Compaq who have a substantial investment in their (distribution) channels are going to have a hard time," said industry analyst Jim Balderston of Zona Research. "They're on the horns of a dilemma." Before Internet-based business began to take off, it was easy to ignore, or push to the side, any concerns. But increasingly the issue is taking center stage. "I wouldn't be surprised if we saw billions of dollars in write-downs as assets that are no longer as valuable as people thought because the Internet created a new channel," said MIT's Brynjolfsson. Dell closed its latest quarter with a 50 percent profit gain, and Compaq managed to gain just 13 percent. More recently, Compaq's deposed management struggled to convince Wall Street that the problems it faces are industrywide. But many believed Compaq itself was stumbling, and its Internet strategy could take the blame. "We think that Compaq's hybrid model of part-direct and part-indirect is not working well," said Merrill Lynch's Steven Milunovich in a report. Chairman Benjamin Rosen conceded in an interview with The New York Times after the reshuffling that "some of our competitors have done a better job of positioning themselves in exploring that opportunity." Even before there was a World Wide Web, Dell was growing quickly as a "made-to-order" company, building machines only when it had orders for them. Giving Dell the Internet just put their strategy on steroids. It built a $3 billion-a-year Internet ordering business before competitors like Compaq even responded. Compaq faced a far more delicate situation than Dell, having a big, active network of distributors who made them the world's largest personal computer seller. "It's a challenge for companies to figure out how they migrate to the new environment without alienating people," said Balderston. But similar problems face many companies, said Balderston. "In industries where there are opportunities for cost savings or opportunities -- and the top executives miss the boat, they are going to pay the consequences." A likely target is the brokerage industry, where some top executives could face growing questions about why their Internet competitors have created 7 million new trading accounts in the past two years. While all of Wall Street has been lifted by the bull market rally, a market pullback could begin to boost pressures on executives at the biggest companies. "Any industry that's not going through their Internet strategy, inside and out, is suspect," said an analyst at a top Wall Street house who asked not to be named. "Wall Street's been telling everybody else to do it -- but we haven't done it ourselves."