UPS strike? What UPS strike?
That's the pose computer makers are striking as the Teamsters and the United Parcel Service continue negotiations in the walkout's third week. But beneath the public display of cool, some corporate nerves are reportedly beginning to fray as executives cross their fingers in hopes that a tentative settlement reached tonight becomes permanent.
"Companies I've spoken with are not willing to go on the record saying 'lower your numbers,' but they are saying that the strike is starting to have a measurable effect" on earnings, said Kevin McCarthy, equity analyst with Donaldson Lufkin & Jenrette. "It's starting to be really troubling, quite frankly."
"We've gotten some reports of customers who have seen delays of final delivery, but in terms of moving product there has been no impact and we don't expect there to be," said T.R. Reid, spokesperson for Dell Computer.
Reid said Dell was particularly invulnerable to the effects of the strike because the company shipped less than 20 percent of its goods through UPS to begin with. Other companies more reliant on UPS include Gateway 2000, which by McCarthy's estimate shipped more than 50 percent of its products through UPS.
Alternative carriers pose a number of problems. In addition to being more costly than UPS, they are now overloaded picking up enormous slack. The first day UPS trucks stayed parked in their lots, Federal Express reported an increase of roughly 30 percent in daily shipments. As a result, the company stopped accepting new accounts, restricted orders on existing accounts, and rescinded its money-back guarantee.
"If UPS stops shipping 12 million packages a day it's going to put some strain on the other channels," said Micron Technology spokesperson Denise Smith. But Smith, who said that her company normally relies on FedEx for about 80 percent of its shipping needs, said that more than 90 percent of two-day FedEx shipments of Micron products were arriving on time.
Micron normally uses UPS for less than 10 percent of its shipping, according to Smith.
While most of the attention has been focused on the direct computer sellers, McCarthy warned that indirect vendors--such as Hewlett-Packard, Apple Computer, and Compaq Computer--are similarly threatened.
"All product has to be shipped--whether it's from the factory to a house or from the factory to the channel to the store," said McCarthy. Because the indirect vendors have more shipping points, he added, they may be in even more trouble than the direct vendors.
Meanwhile computer vendors continue to keep their chins up.
"We didn't expect the strike would have a serious material effect on our business and don't expect that it will, period," Dell's Reid said.