Compaq woes put user loyalty at risk

Hardware Channel policy confused after Digital/Tandem buyouts.

Compaq was warned last week that it faces significant problems with merging its sales channels since its acquisition of Digital and Tandem and that it risks losing customers.

Brad Day, vice president of consultancy Giga, told the audience at a seminar in San Francisco that, while Compaq poses a significant threat to other hardware vendors as it has strengthened its product range with the two acquisitions, its channel strategy is confusing and complicated.

'All of the other hardware vendors are concerned about Compaq. For companies such as Sun and Hewlett Packard, it's now enemy number one,' he said.

'But it's still not integrated at the moment - it has too many channels and is in a mess with its customer activities.'

Day added: 'Compaq isn't offering any company-wide discounts and customers are being given different rates from different parts of the business, which they're not happy about. The company will have to do something about it in the next 12 to 18 months or it'll be in trouble.'

To add to Compaq's problems, the Tandem acquisition had taken longer than expected and was still not complete, he said. The Digital purchase earlier this year will hit the manufacturer's financial results and Digital's service business would also depress revenue per employee ratios, which will not be appreciated by Wall Street.

Compaq will also have difficulty positioning Digital in relation to Tandem and would need to clarify its Alpha and Unix strategies, according to Day.

A representative for Compaq commented: 'There are always transition issues after a merger but things are progressing smoothly. Services will be an important part of our business. Our channels and customers are generally satisfied, but we always have to keep up the dialogue.'