Compaq targets smaller businesses

The PC maker is using its new "Business Tuesday" campaign to establish relationships with companies with less than 1,000 employees, collectively known as small- and medium-sized businesses, or "SMB."

Each week, the campaign will offer discounts on computer hardware for a period of 72 hours to customers who buy directly from Compaq. Next week, Compaq will offer a free iPaq wireless LAN (local area network) card to buyers who purchase a Compaq notebook such as the Armada 110. Past promotions have offered customers the ability to buy one iPaq PC and purchase a second for half price.

But after wooing customers initially with discount PC hardware, Compaq executives hope buyers will come back for additional hardware, such as servers and storage, as well as services.

The gimmicky approach fronts a renewed effort by the PC maker to tap the market for small and midsized businesses. Compaq has also, for example, established a dedicated SMB sales force and a group of business development managers focused on SMB in their work with resellers. The company has also begun to offer SMB-specific models in its Evo line of PCs.

Compaq has made various efforts in the past to tap small and midsized business sales with varying levels of success. One of its most visible efforts, the Prosignia PC line, was abandoned in part because SMB customers chose other Compaq equipment.

But the most recent effort is more subtle. Instead of offering an entire PC line, it offers special small-business models under its Evo line.

Between now and Oct. 31, Compaq will sell a special Evo D300s PC with Windows XP, Windows Office XP Small Business Edition, a Pentium 4 processor and 17-inch monitor. Prices start at $899.

The effort helps boost sales in an increasingly difficult PC market battered by a slowing economy. No. 2 in the worldwide PC market, Compaq's sales slid 31 percent in the third quarter, according to the latest market share figures from Gartner Dataquest.

Business Tuesday "gives us an opportunity (for sales) and the customer a chance to learn more about Compaq and the services and the products that we offer," said Dan Busse, Compaq's director for North America SMB marketing.

Small businesses might "think of us on the desktop, or they think of us in huge corporations," he said. The new promotion "shows we clearly have solutions and products that support where they're headed."

Busse would like to be able to sell packages of PCs and services to small and midsized businesses in much the same way that the company does with big customers, such as the billion-dollar contract it recently won from the U.S. Postal Service.

But analysts say small business is a tough sell.

"SMB sales can be a trap if you get too far in," said IDC analyst Roger Kay. "If you spend a lot of money getting those sales, you're not getting much in return. It's kind of bitter fruit."

Compaq faces, among other things, stiff competition from Dell Computer, which is also targeting small and midsized businesses with discounts, and local "white box" PC makers that can use proximity--and sometimes price--to compete.

White box makers are smaller, local PC suppliers that build their own PCs and often deliver services to boot--ranging from basic consulting and technical support to installation of additional hardware and networks.

"Compaq has not really been that competitive with promotions, particularly in the commercial space," said Toni Duboise, an analyst with ARS. "This is an opportunity for them to change that. This is an opportunity for them to step up into the promotional battlefield."

Dell Computer has, for example, been offering $100 rebates on most of its Dimension and OptiPlex desktop PCs throughout most of the year. Recently, it increased the rebate to $150 on Optiplex GX240 PCs priced at $1,000 or more, Duboise said.

Compaq has "got a long ways to go to step up to that level," she said.

But Busse concedes there is "competition on all sides."

Compaq's pitch offers the potential for longevity and multiple points of contact with customers.

Those points of contact include direct sales, sales via resellers, and initial consulting services, by which a Compaq employee is dispatched to the office of the potential customer.

"We work with the customer on the basis they want to work," Busse said. "White box has been successful...by being down the street. We've talked to customers who say, 'We're so tired of Joe down the street going out of business.'"

While he might disagree on Compaq's approach, Kay agrees with the need for direct customer contact. "It's much less about price and much more about the relationships," he said.