Compaq 1998 hardware sales plummet

Accustomed to being king of the hill in most Slovak information technology sales categories, global computer giant Compaq was rudely suprised by its Slovak sales results for 1998. Compaq saw sales plummet in many market segments, including desktop sales where the firm's products recorded a 45% decrease.
Statistics provided by the Internation Data Corporation (IDC) show that the Slovak computer market as a whole suffered a lean year in 1998. However, the two major players on the scene, Compaq and IBM, had far different annual results. While Compaq began and ended the year as number one on the market (a category that combines desktop, laptop and server sales), it suffered a dizzying fall of 38.4% in units sold.
IBM, meanwhile, grew 17.6% in overall hardware sales in 1998. While the firm's 1997 unit sales figures were only 45.8% of Compaq's totals, in 1998 the gap narrowed to 87.5%

Accustomed to being king of the hill in most Slovak information technology sales categories, global computer giant Compaq was rudely suprised by its Slovak sales results for 1998. Compaq saw sales plummet in many market segments, including desktop sales where the firm's products recorded a 45% decrease.

Statistics provided by the Internation Data Corporation (IDC) show that the Slovak computer market as a whole suffered a lean year in 1998. However, the two major players on the scene, Compaq and IBM, had far different annual results. While Compaq began and ended the year as number one on the market (a category that combines desktop, laptop and server sales), it suffered a dizzying fall of 38.4% in units sold.

IBM, meanwhile, grew 17.6% in overall hardware sales in 1998. While the firm's 1997 unit sales figures were only 45.8% of Compaq's totals, in 1998 the gap narrowed to 87.5%

Ján Chudík, network and sales integration services manager for Compaq, downplayed the significance of Compaq's nose dive, saying that the firm's main customer base, the cash-strapped public sector, had no money to spend. "The results are not so surprising," he said. "Compaq is strong with government agencies and state-run companies. Right now, these organisations have been forced to be careful with their expenditures."

Stanislav Stowasser, general director of Internet provider Global Network Services, agreed that Compaq's sales hemorrage was a result of its clientele. "Government and state companies are Compaq's main customers, and they just don't have money right now," he said.

Stowasser warned that business could continue to be slack until after the millennium. "Compaq had a strong place on the market because those state companies all had old technology which needed upgrading," he said. "But now they have had to curb their spending. and this is a trend that will probably continue until after 2000. Compaq's clientele understand that upgrading is important and necessary, but they just cannot spend the money right now."

IBM, meanwhile, experienced healthy sales in 1998 and managed to close the gap on their principal rival. IBM General Director Miroslav Majoroš said that catching Compaq had motivated his company to improve its performance. "We knew the numbers, and we wanted to change them," he said. "As you can see, we have started to succeed."

Chudík explained that IBM's wealthy clientele had enabled the company to narrow the sales gap. "IBM has caught up with us," he said, "because they have a large share in the banking sector, and the banks still have money to spend."

Stowasser said that quality, too, has played a role in the sales figures. "It is not surprising to see IBM increase its share [by 18.2%] in the mobile [laptop] sector because they managed to decrease the prices of laptops while increasing quality," he argued. "IBM makes the best laptops by far."

On the other hand, Stowasser called IBM's 15.2% increase in desktop sales "a bit surprising, because I don't think their desktop quality is very high."

Numbers insignificant

Radovan Horváth, product manager for Compaq, said that the importance of the sales figures should not be overstated. The firm's poor results, he said, were due to a temporary decline in the number of network and system integration and upgrading projects that had been commissioned by Compaq customers. "IT companies generate great revenue through [these] projects," he said, "and we simply did not have projects this year. The fall in our numbers is a direct result of a lack of projects."

Compaq's Chudík added that any statistics collated from the minute Slovak market should be regarded with great skepticism. "Large markets behave statistically. But Slovakia is a small market which can be greatly affected by one or two projects, which in turn greatly distorts the numbers."

"The market has been dead since elections, three or four months ago, " he continued. "In two or three months it will recover. This drop in numbers is a simple phenomenon and should not be taken too seriously."

In June 1998, Compaq merged with Digital, another global IT giant. The merger was worth $9.6 billion, creating the world's second largest computer firm with revenues of $57 billion in 1997.

As a result of the merger, Digital Slovakia was renamed Compaq Slovakia, creating a company with combined annual revenues of $55 million.

Compaq's Horváth said that the partnership with Digital had not caused the sales drop, and said that Compaq was not about to change its market strategy. "The merger will help us," he said. "Just wait and see, the numbers will change."

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