Compaq’s Internet Problem

Compaq Computer Corp. gave the stock market a big scare Tuesday. The company said it would miss earnings estimates, and the stock lost about one-fourth of its value. There was fear this might be the start of a real technology slowdown, but when Intel’s earnings beat estimates that fear dried-up.

It turns out Compaq does have a problem, and it’s us.

While Dell and Gateway were putting all their efforts into selling servers or clients online, Compaq was buying mini-computer makers like Digital and Tandem, turning them into Windows NT shops, and depending on resellers to close sales.

I have nothing against salesmen personally, but as computers become as standardized as televisions, and emphasis moves from the desktop to the network, I don’t need them. More important, I don’t need to pay for them. Even if the dealer’s building my Compaq PC from parts, or if Compaq is custom-building PCs for dealers in Houston, dealers need to eat, and customers are no longer willing to feed them.

Even the U.S. government is learning it can live without resellers. While Compaq was working with dealers, Dell Computer did some system integration work, linking its Web site directly with the General Service Administration’s Advantage procurement system. The result is that government workers can now order PCs right from their offices, with all the bureaucratic hassles kept in the background. Dell is now the leading PC supplier to the U.S. government market.

It’s not always easy to link your e-commerce site to the legacy systems (and business practices) of your biggest customers. But one thing is clear in the business-to-business market. Driving down the cost of buying trumps all the sales pitches in the world. That, in a nutshell, is Compaq’s Internet problem.

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