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Compaq targets public agencies

Following the success of others, the computer maker will offer reduced-priced software and hardware bundles aimed at public sector markets.

Compaq Computer (CPQ) will begin offering reduced-priced software and hardware bundles aimed at the education, government, and nonprofit markets in reaction to the success that systems makers such as Dell (DELL) and Gateway 2000 (GATE) have enjoyed recently.

Compaq says the public sector is its fastest-growing customer market. These markets are generally quite price-sensitive, a factor that has helped systems companies make signficant sales gains, especially those that sell directly to customers.

In the federal government, for example, recent changes to the procurement process have aided these direct systems vendors. The result was that Gateway increased sales to the government by better than 100 percent last year, and Dell grew sales by almost 90 percent, according says Payton Smith, a research analyst with International Data Corporation.

Compaq's growth wasn't nearly that high in the government market, he said, noting that its increases wouldn't be as dramatic because the company already had a presence in the public sector. Still, Gateway and Dell are grabbing a healthy portion of the limited number of federal dollars available.

"I'm not surprised they are taking significant steps to correct that. A lot of [direct market success] is due to the procurement reform changes put in place over the past year or two, which overall seems to favor the direct model," Smith said. "There's a lot of focus on price right now. Compaq will fight commoditization of systems with bundling."

Compaq says the ValuePaq bundles will combine special software packages with the company's Intelligent Manageability technology for maintaining and monitoring PCs. The bundles will be offered at prices up to 11 percent less than normally available from Compaq's current direct order prices. The ValuePaqs will be available with the DeskPro 2000, DeskPro 4000, and Presario ES desktop PCs, as well as the Armada notebooks.

The systems are available while supplies last. Compaq will continue to announce new bundles as they become available.