The week's news: Compaq dives into direct sales

In an effort to stave off rival Dell Computer, the world's largest PC manufacturer inaugurates direct sales to small and mid-sized businesses.

4 min read
Compaq Computer, the world's largest PC manufacturer, inaugurated a direct sales program for small and mid-sized businesses that heralds a sea-change in the industry's business model.

Bowing to the phenomenal growth of Dell and other direct vendors, Compaq will sell Prosignia models via its Web site, while also offering financing options. A direct sales program for consumers will follow.

Looking over your shoulder
The new product line will include a 300-MHz Celeron Prosignia desktop starting at $1,219; the cost of a lease will be $42 per month. A 233-MHz Pentium II Prosignia notebook will start at $1,999, while a 350-MHz Pentium II server will begin at $2,033.

Unveiled by CEO Eckhard Pfeiffer in New York, the new program ratchets up the pressure on the "channel," the industry's well-established network of middlemen and resellers. Beyond lower prices, the initiative will entail selling a variety of services to customers, cutting into one of the higher-margin business areas for dealers.

Separately, Compaq slashed prices on its midrange Presario line of consumer desktops, bringing these systems below $1,000 for the first time in an effort to distance itself from such competitors as Hewlett-Packard, which have been gaining ground. The move could fuel a price war.

Online enterprise
Excite will offer a new financial center as well as personalized banking and bill-payment services, while leading credit-card lender Bank One will get exclusive rights to market its services on the Net directory's home page. The service is expected to launch during the first half of 1999.

E*Trade and several traditional broker-dealers announced plans for a new electronic options exchange called the International Securities Exchange (ISE). Organizers said the new market, which will compete directly with the four U.S. options exchanges (Chicago Board Options Exchange, the Pacific Exchange, the Philadelphia Stock Exchange and the American Stock Exchange), will operate with greater efficiency and accuracy, at a lower cost.

Pete Higgins is stepping down from his post as vice president of Microsoft's Interactive Media Group, an unexpected move that comes as the software giant is creating an Internet portal fusing all of its online properties. After three years of shifting strategies and nearly $1 billion in losses, new blood could boost the company's efforts to catch giants Yahoo and America Online.

The comeback trail
The semiconductor industry is poised to begin making a comeback that could culminate in annual industrywide sales of $182 billion by 2001. According to the Semiconductor Industry Organization, PC inventories are under control while the glut in memory chips has largely vanished and demand for memory, microprocessors, and other chips is expected to continue growing, soaking up the excess factory capacity which drove down prices in the past two years.

Intel's fourth-quarter sales could jump by 10 percent compared to the third quarter, based on stronger-than-expected demand for PC microprocessors. The announcement marks the second time in the last six months the world's largest chipmaker has said it will beat Wall Street expectations.

Buoyed by EarthWeb's shining debut and the strong performance of online auctioneer eBay, Internet IPOs may be making a comeback after a miserable fall. Shares more than tripled in their first day of trading.

Novell continued winning converts to its directory services software, announcing an agreement with Nortel Networks to integrate its NDS software with forthcoming management software from the networking giant. The move follows an agreement with telco equipment behemoth Lucent Technologies that was inked last month.

What next?
Last week's surprising mid-term election results could prove to be momentous for the high-tech industry: Although most tech-savvy politicos made cut, Internet Caucus founder Rep. Rick White (R-Washington) was not reelected. Moreover, House Speaker Newt Gingrich (R-Georgia) is stepping down, as is President Clinton's six-year technology adviser, Ira Magaziner.

Microsoft tried to cast doubt on the testimony of a senior Intel executive who claimed that three years ago Microsoft threatened to withhold support for forthcoming Intel chips if the latter developed software that Microsoft viewed as a threat. But the software giant's lawyers failed to get government witness Steve McGeady to budge.

Although an outcome in the Microsoft antitrust trial is months away, a decision in the Sun-Microsoft Java lawsuit--due any day now--could have a profound effect on how proceedings take shape. Sun's claims that Microsoft's version of Java is not cross-platform compatible and that Microsoft has sought to "pollute" Java are mirrored in the antitrust case, and if they are rejected, that issue would be taken off the table in Washington.

Also of note
Glitches in the domain-naming network may have hampered access to some Web sites on Wednesday ? Apple Computer's QuickTime multimedia software is due for a January technology boost that will again place it in Microsoft's path ? Iomega was sued over an alleged manufacturing flaw called the "click of death" ? IBM unveiled a 25GB hard drive for consumer PCs, and a faster 22GB drive for corporate systems ? Comdex, the huge Las Vegas computer industry trade show, opens on Sunday night.