Feeds

Direct path will solve Compaq woes

Thin end of Dell-shaped wedge, Simon Meredith reckons

  • alert
  • submit to reddit

New hybrid storage solutions

Compaq’s announcement that its Q1 earnings would fall short of expectations due to a slowdown in demand for business PCs should not come as a surprise. This merely confirms we have known for months -- that PC sales will increasingly go direct and that companies with the lowest cost model will do best. Right now that means Dell is in the driving seat. Compaq is trying to respond...it has to! But there are more worrying signs for Compaq partners and customers. The company has been too slow to react to Dell and, in a market that’s reluctant to grow, the impact on its business has been worse than expected. There was also a hint of panic in the timing of the announcement – made retrospectively, a week after the quarter ended rather than in mid-quarter when the tide looked like turning. Perhaps Compaq did not realise the scale of the problem or thought it could turn things around. Also of concern is the lack of extra margin in the server business. Dell is taking a chunk out of this market too. The top end is very competitive and confused. From this position,shareholders should consider what they really got out of the Digital acquisition. The answer may be a long time coming. Global reach, services business and extra corporate credibility provide the rationale for buying Digital. But none of those will deliver short-term advances in EPS. So the forthcoming announcement of Compaq's new "enterprise strategy" may not comfort many shareholders. More cost cutting plans will be welcomed but they may be the thin-end of the wedge. Further and much more substantial cutbacks are needed to boost the shares in the difficult Spring quarter. But with prices lower than ever, Compaq will be forced to accelerate its move towards direct and on-line sales. That will mean more consternation in the channels but if this means Compaq is a sounder supplier and is able to compete more effectively with Dell, it won’t be bad news for anyone. There is no need for anyone to be unduly worried about Compaq – it is a big company, it will survive. But it must be realistic if it is to remain a strong competitor and not suffer long-term damage during this difficult period in its development. The company, its partners and customers need to brace themselves for a succession of blows to morale. In the end though, it will be the shareholders who need to hold their nerve steadiest of all. They have the ability to inflict real damage to confidence and weaken Compaq’s long term ability to compete. Compaq aims to be something more than just a PC supplier to its customers; Compaq wants to sit beside IBM and HP as global computer systems and services suppliers. To achieve that aim, it will need impeccable corporate credibility. Compaq then must manage the stock market’s expectations very carefully and act swiftly and decisively to curb the rise of Dell and cut its cost model. It is far better to under–promise and over deliver than continue to insist that everything is wonderful in the garden when very clearly it is not. ® Simon Meredith is a freelance computer journalist

The next step in data security

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Murdoch to Europe: Inflict MORE PAIN on Google, please
'Platform for piracy' must be punished, or it'll kill us in FIVE YEARS
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Protecting users from Firesheep and other Sidejacking attacks with SSL
Discussing the vulnerabilities inherent in Wi-Fi networks, and how using TLS/SSL for your entire site will assure security.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.