Sweetwater's Compaq partnership goes sour

Sweetwater's Compaq partnership goes sour

Compaq is remaining tight-lipped about recent changes to its distribution lineup despite confirmation last week its aggregation relationship with maverick channel company Sweetwater is over.

Sweetwater manager Abbas Aly told ARN the aggregation relationship between his company and Compaq has been terminated, claiming the relationship was originally formed on a trial basis with Sweetwater deciding to call off the deal.

The controversial relationship was formed in December 2000 when Compaq signed Sweetwater to "aggregate" its Deskpro SB (small business) and Armada 100 series PCs to small-business resellers.

At the time of its announcement the deal was greeted with a stony response from other Compaq distributors. Ingram Micro's managing director Steve Rust said that it caused a lot of confusion in the Compaq channel.

"There was a lot of disappointment when the Sweetwater-Compaq deal was originally announced because it was done without any consultation with the pre-existing Compaq channel," Rust said. "At the time, many of the Compaq distributors felt they could have responded to Compaq's requirements."

However, Rust was quick to point out Compaq had taken some significant steps to alleviate channel concerns, and had managed to rekindle a positive relationship with its distributors.

"We maintain we have a lot of potential to address the channel," Rust said. "Different vendors have different requirements, and the role of the distributor is to be flexible and offer the most appropriate resources to both their vendor and reseller partners."

Aly on the other hand maintains Sweetwater was fulfilling an important "aggregation" function which traditional distributors were not able to offer.

"Our role was to deliver products into the channel fast," Aly said. "We were progressing along that path."

While Aly commented that Sweetwater did have some concerns over delivery, he said there were no specific conflicts leading to the break.

"I can state categorically we have not breached any clauses in the contract with Compaq," Aly said. "They needed to decide how they would get product to the channel. I believe Compaq is reviewing its whole distribution model again."

Compaq is refusing to comment on the deal.

"I remember there was a lot of angst and uncertainty. I do believe that has been corrected now, we all make mistakes," Rust said.

Q's rocky road to the channel

March 1999 - Compaq slashes its distribution channel to six distributors.

July 1999 - Compaq announces its intention to open a series of "direct-to-customer" retail outlets.

August 1999 - Harvey Norman dumps the Compaq brand after its retail plans are announced.

June 2000 - Compaq announces its intention to roll out Compaq Connect stores according to a franchise model.

November 2000 - Compaq announces its "aggregation" relationship with Sweetwater.

April 2001 - Compaq announces the demise of its "direct-to-customer" approach with the closure of the last Compaq Connect store.

May 2001 - Harvey Norman agrees to restock the Compaq brand.

June 2001 - Sweetwater confirms the termination of its aggregation relationship with Compaq.

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