Compaq mimics Dell, Gateway's approach

Emulation is the best flattery, they say, and Compaq Computer seems to be trying hard to replicate Dell and Gateway's successful direct-marketing strategy.

3 min read
Emulation is the best flattery, they say, and Compaq Computer seems to be trying hard to replicate Dell Computer and Gateway's successful direct-marketing strategy.

Compaq, the world's second largest computer company, continued its onslaught onto the Internet by today announcing the formation of the Compaq.com business division which will be responsible for Compaq products, services, and solutions to customers over the Web.

The leader in personal computer sales has moved aggressively recently to try to increase its Internet presence, from spinning-off Web portal AltaVista this week which it hopes to use to drive computer sales, as well as launching late last year Compaq's direct-marketing aimed at small and midsize businesses.

"Our DirectPlus effort focused on selling to small and midsized businesses as well as the Presario line," said Kenny Kurtzman, the newly appointed vice president and general manager of Compaq.com, in an interview with CNET News.com. "Compaq.com will focus on all sales to all customers over the Internet."

Kurtzman will be reporting to Enrico Pesatori, Compaq's senior vice president of corporate marketing. Kurtzman was most recently vice president and general manager of Compaq's small and medium business division (SMB) where he led the launch of the company's Prosignia family of products and Internet services, and SMB direct sales program.

"We are focused on creating Compaq.com as a place not only to sell great products but also to establish a relationship with the customers beyond the initial sale of the product," said Kurtzman.

Looking forward, some analysts think the added services will evolve into a strong new revenue stream and play a pivotal role.

"The announcement suggests that the vision that they are looking at in trying to make Compaq.com a hub for future services that can be delivered through the Web is extremely powerful," said Deepinder Sahni, an analyst at Access Media International.

"If you can funnel Internet services such as Web-based ERP and supply-chain management that build on top of the emerging e-com infrastructure, then you really begin to add value," Sahni added.

Shares of Compaq edged higher, rising 1.19 percent to 47.75. Compaq was the second most heavily traded issue on the New York Stock Exchange with 9.6 million shares changing hands in afternoon trading . The stock has traded as high as 51.25 and as low as 22.94 during the past 52 weeks.

Compaq said only about 8 to 10 percent of its business currently is generated from true Web sales--when people don't just scout out a product but actually place an order.

"In the next three to four years, I would like to see that number go from 10 percent to about 30 or 40 percent," said Kurtzman.

Computer resellers, who make their living by serving as the middleman in computer transactions, will likely have to evolve in order to stay afloat in the emerging Internet-driven computer sales model.

"We still have a very important relationship with the resellers, and they are always going to be a critical part of our business," said Kurtzman. "But I think what is happening is that the Internet is changing how people think about buying technology.

"The business model for resellers can improve by shifting from fulfillment of hardware to provision of services and support," added Kurtzman.

These support services offered by resellers are going to play a vital role, analysts agree.

"PC makers have realized that although direct-marketing has grown fairly rapidly, the services and support component is still vital," said Sahni. Computer makers won't be able to support all their customers with their technicians alone, Sahni added.