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Compaq's Australian stores part of a trend?

The move brings the computer retailer a step closer to direct sales, which would make it more competitive against firms such as Dell.

Taking one more step down the path toward direct sales, Compaq Computer said it plans to open retail outlets in Australia, a pilot effort that could expand.

Sources close to Compaq said the PC maker may continue the trend elsewhere in the region and, potentially, to the United States, although no plans are currently in place.

"The world of personal computing is changing and we are changing with it," Ian Penman, managing director of Compaq Australia, said in a statement. He added that the stores will be branded with the Compaq name.

Compaq's decision comes at a time when traditional computer makers are trying to keep up with the rapid growth of companies such as Dell, which sell directly to the customer. Companies that sell directly to customers also have been able to sell for lower prices, or for more profit, because the costs associated with direct sales are lower.

A shift to direct sales, however, comes with its own problems, including conflicts with traditional computer dealers. Compaq's Australia plan is proving no exception. Harvey Norman, a retail group in Australia, has decided to drop Compaq products as a result of the new stores.

Analysts and computer executives have said that these conflicts can potentially lead to depressed sales as dealers switch allegiances to other brands.

It is uncertain whether Compaq will open stores in the United States, where PC retailing is in a state of flux. Major retailers, including CompUSA, are reducing their reliance on PC sales in favor of a wider variety of consumer electronics. Descending PC prices have eviscerated the profits on the machines, the stores have said. Electronics retailer The Good Guys has decided to abandon PC sales completely.

On the other hand, outlets owned or managed by major PC manufacturers are gaining in popularity. Gateway has attributed part of its recent sales growth to its Country Store outlets, where customers "test drive" Gateway computers before placing an online order.

In similar fashion, IBM is opening a "store-within-a-store" at select Best Buy outlets, which will feature only IBM products. IBM will help cover the cost of employees and operating expenses for the outlets.

Compaq has not opened retail outlets in the United States, but it has been emphasizing direct sales to customers via its Web site for more than year. Web sales are adding adding millions of dollars in revenue each month.

The rush to real estate, however, is not universal. Michael Dell, chief executive of Dell Computer, has said his company has no plans to get into stores. Retail sales, Dell has said, plateau over time, but expenses do not.