Compaq Pares Distribution

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Compaq's decision to pare its list of distributors it deals with directly will not affect the company's retail operation or consumer product line.

Compaq's new Distributor Alliance Program - which will eliminate 70% of the company's distribution points when it goes into effect on August 1 - is intended to streamline its business operations and clean up the company's inventory-control problems, said Mike Pocock, VP of North America Channel Sales.

The program is in direct response to Compaq's poor first-quarter performance, which saw the company's earnings fall short of Wall Street expectations and led to the resignation of president/CEO Eckhard Pfeiffer and CFO Earl Mason in April.

Acting CEO Ben Rosen said last month that Compaq would move quickly to improve the company's overall efficiency.

"We now have 100 distribution points," said Pocock, "and given the breadth of our line this is tough to deal with. So we will go from 100 to 30 and will concentrate our inventory in fewer locations."

Compaq will deal with four primary distributors, Inacom, Ingram Micro, Merisel and Tech Data. These firms will take over distribution for most of the companies that Compaq had been dealing with directly. All four distributors also have distribution facilities co-located with Compaq in Houston.

Pocock said this move will improve Compaq's channel fill rates, lowering the average time it takes product to reach retailers from 10 to 30 days to less than 72 hours and cutting inventory levels in half.

Merisel reported it is adding infrastructure and new marketing programs, and expanding its service offerings for Compaq-authorized resellers.


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