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BACKTRACKING 12 MONTHS: The demise of the direct approach

BACKTRACKING 12 MONTHS: The demise of the direct approach

Twelve months is a long time in the channel, just ask former Compaq managing director Ian Penman. Early February last year, he was crowing about the success of the eight Compaq Connect stores he managed to launch despite a sharp industry backlash.

The decision to launch the retail outlets brought Compaq into a very public stoush with retail chain conglomerate Coles Myer, and led to a calamitous rupture with Harvey Norman.

Despite the furore it created in the channel Compaq pushed ahead with its stores, driven on by US-based CEO Michael Capellas who was ambitiously predicting direct sales would represent 40 per cent of all global sales and 60 per cent of US corporate sales within 12 months.

Much to the delight of channel pundits the direct model did not go according to plan, with Compaq announcing plans to franchise the 100 Compaq Connect stores it established across Australia. The about-face attracted high-profile retail groups Bing Lee, JB HiFi and Betta Group into the Compaq fray, finally replacing the market presence lost when Harvey Norman announced a very public split with the PC vendor.

In February 2000, Australian OEMs were also beginning to wilt as Intel chip supplies dried up. Their cries hit a crescendo mid year as accusations of foul play flew thick and fast. Intel began to cop flack for neglecting commitments to local producers while it kept the big boys happy.

Intel toed the "overwhelmed by our own success" line, claiming the shortage was the result of a sudden surge in demand. The situation eased toward the end of the year, but provided AMD an all important window into the CPU market both here and abroad.

Demand was certainly on Intel's side when in April it announced a first-quarter revenue of $US8 billion, a rise of 13 per cent on the $7.1 billion revenue it reported for the same quarter a year ago.

And to its credit Intel attempted to ramp up production, putting aside $4 billion for the construction of new fabs in Arizona and County Kildaire in Ireland. However, it was not fast enough for many Australian white-box manufacturers that saw their markets come unstuck when the chip shortage began to affect their ability to supply.

However recent contractions in demand may well see even the best-laid plans go to waste, with the announcement late last year that Intel would delay the opening of a wafer fabrication plant in Ireland which had been touted to support a new wafer production technology.


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