Compaq moves into high-end services market

Compaq is fine-tuning its networking division, pushing aside commodity items such as modems into other divisions and concentrating on selling high-end equipment and services.

The move represents a significant turnaround by Compaq from its bullish attitude three years ago about the prospects for its commodity networking products, saying then that the SME market was ripe for picking.

Compaq will shift control of its modems to its enhancements and options division, which sells other desktop goods such as monitors. Network interface controllers and remote access products will now be sold by Compaq's server division.

Richard Brown, networking product marketing manager at Compaq, said: 'We are restructuring to focus on the high-end equipment that is coming via the Cabletron deal.'

The shift in focus will mean larger customers for Compaq, according to Brown. 'Previously, we were tinkering around the edge of the network.

Now we can offer everything down to the core,' he said.

Analysts said Compaq's decision was appropriate. Clive Longbottom, strategy analyst at CSL Consulting, said: 'When you're looking at small hubs and modems, it's too competitive a market and Compaq doesn't have a name there.'

Compaq does not have a good retail channel for commodity items, while it does for high-end equipment and services, added Longbottom.

'USR and that class of vendor has got it sewn up. You're better to go for a big system sell where you're making millions of dollars - there won't be a big margin on it, but it will sell well with the Compaq name,' he said.