Compaq Buys Inacom, Expands Direct Sales

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Compaq hopes to improve its total percentage of direct sales in the U.S. from 25 percent to more than 40 percent with its purchase this week of a number of operational assets from Inacom Corp., Omaha, NE.

As part of the $370 million cash agreement, Compaq, Houston, will acquire four of Inacom's major configuration centers in Indianapolis; Omaha, NE; Ontario, CA; and Swedesboro, NJ. It also will acquire a call center in Omaha and "associated e-commerce management and IT resources." More than 2,500 employees will be transferred from Inacom to Compaq.

Compaq will use the assets to operate a separate, wholly owned subsidiary focusing on direct sales. That subsidiary will be given its own name at the time of the deal's closing, which is expected to take place later this quarter.

"There will be a lot of non-Compaq products sold through these channels, so we will want to keep it at arms length from Compaq," said Mike Winkler, senior vice president and group general manager of the commercial personal computing group at Compaq, who will be running the new subsidiary. "We want to give it a unique identification."

Winkler said one of the major benefits of the deal is that it gives Compaq "industry-leading custom configuration" and end-to-end order management and the single point of accountability that its major accounts and small and medium-sized business customers are now demanding.

"Customers want to have a direct relationship with us instead of purchasing products at retail locations," said Compaq spokesman Alan Hodel. "They also want an expansion of services and products offered by third-party suppliers."

"By bringing these operations inhouse, we improve our direct capabilities and complement our existing programs such as Partner Direct and Agent programs, through which we ship directly to our customers on behalf of value-added resellers," Winkler said. "This transaction provides us the ability to better execute our direct strategy."

With these additions, customers can place an order over the phone or through Compaq's Web site and then track where it is down to "the level of it being on the UPS truck on their block." Customers can now track their orders from placement to delivery via the Web and will be able to track the order status for all phases of the product delivery.

In order to provide those features, it needed an outside party that could supply the technology and tools that would improve its direct sales program.

"We found that the complexity of Inacom's options and software was higher than anything we had developed inhouse," Winkler said. "Those facilities are greater than what any of the manufacturers out there are able to provide."

Compaq had previously used the Inacom order management software, as do Dell, Hewlett Packard and IBM.

"Those companies will still be able to use it but now they will have to get it from our subsidiary," Hodel said.
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