Compaq coaxes Vars with price-cut carrot

If they are to benefit from the vendor's planned 10 per centprice-cuts, dealers and distributors must buy Compaq kit in bulk

Resellers and distributors will be forced to buy large volumes of Compaq PCs to take advantage of a 10 per cent price cut expected from the manufacturer next week.

The cut threatens Hewlett Packard's Project Steer, an indirect channel initiative to promote PC sales (PC Dealer, 18 September). One reseller said HP will be 'blown out of the water' because its Ts&Cs will not be competitive with Compaq's new pricing.

Steve Jackson, head of Compaq desktop products, said: 'I can't comment on things which may be being planned, but pricing is something we are always looking at.'

Senior channel sources said that the reductions will affect new Deskpro machines rather than older products. Jackson refused to confirm this but said there is only two weeks of old stock in the channel, hinting that the vendor will not cut prices on those PCs.

Jackson did not give any details on Vars' volume requirements on promotions, but admitted: 'Compaq is keen to retain a competitive edge whenever possible.'

He conceded Deskpro 4000 and 6000 machines, launched in July, have only just begun shipping in bulk. Sources suggest these are the PCs Compaq wants to promote.

Compaq may have been influenced by Computacenter, which said it will not buy any new Compaq PCs until it had sold stock it was holding because the vendor has withdrawn price protection on old stock.

HP PC and peripherals marketing manager John Yelland said Vars may suffer from distressed inventory. 'If the channel has been told how old the cut-price product is, it is not so bad. But resellers won't like getting stuffed with a load of old, volume kit.'

A Compaq insider said the move is typical of the company's strategy.

'Compaq has thought this through but it will squeeze the dealers,' he said. 'There is no doubt they will have to buy in large volumes. Compaq's problem is that if their PC price falls, so does their brand value.'