Compaq to unveil new strategy

The powers that be from Compaq Computer (CPQ) will unveil long-awaited details surrounding the company's build-to-order strategy Thursday in New York. One immediate result will be lower prices.

The leading PC maker is bringing out its big guns to explain how Compaq will build computers to customer specification in an effort to reduce waste and operating costs, sources said. Attending the event at the St. Regis Hotel in Manhattan will be CEO Eckhard Pfeiffer, chief financial officer Earl Mason, senior vice president Mike Winkler, and North American vice president Jim Schraith.

Compaq will also release its quarterly report on the same day.

As previously reported by CNET's NEWS.COM, the build-to-order strategy cuts manufacturing costs by reducing computer and computer component inventories. The strategy is being adopted, sources and analysts say, so that Compaq can compete more effectively against mail-order outfits like Dell Computer (DELL). Dell reports sales of more than $1 million a day at its Web site and projects substantial growth beyond that.

Compaq will initially release four computers under the new program: two Deskpro 2000s and two Deskpro 4000s.

A preliminary peek at the price list indicates that Compaq has hit its goal. One of the Deskpro minitowers will retail for an estimated $1,550, a source close to the company said. The current equivalent product carries a price of $1,850.

Although details will be made available at Thursday's event, the products will not start shipping until Monday, sources said.

Compaq is meeting with its major distribution partners and computer resellers in San Francisco and will cover the strategy with them there.

The new strategy will have three prongs, according to a Compaq spokesman:

Under the "build-to-order" program, customers will place their orders with computer resellers, which in turn will forward them to Compaq. The company will then construct the boxes to customer specifications and send them to a distributor or integrator for installation of commercial software. This is the program that involves the new Deskpros.

Under the "channel configuration" program, Compaq will ship the shells of computers to distributors and integrators. When a customer asks for a system, these partners will then install hard drives or memory units according to the order.

The "configure-to-order" program is designed for large corporate customers that want hundreds or thousands of customized computers. For these customers, a reseller will work with Compaq to fill the order.

The Compaq spokesman said the build-to-order stage will come first.

Other manufacturers are currently similar strategies. Again, the motivating factor is cost.

"Compaq is able to build stuff as cheaply as anyone. The 10 to 15 percent price differential with distribution is where they are getting clobbered," said Roger Kay, a senior research analyst at International Data Corporation. "Dell has the advantage of knowing what customers want."