Compaq denies channel stuffing claims

Compaq said it is "comfortable" with channel inventory levels for its third quarter, despite analyst warnings of "channel stuffing" in the PC industry.

The company, which is due to report its third-quarter financials after the close of the market today, moved to reassure Wall Street analysts following reports that PC makers had been flooding distribution channels with stock to boost their sales figures.

Dataquest analyst Charles Smulders said that although he had seen year-on-year growth of 15.2 per cent in worldwide PC shipments for the third quarter, the increase in the market could be misleading.

"We suspect these relatively strong numbers in the third quarter reflect a build-up of channel inventory and we do not believe the market can support the kind of growth these numbers would indicate," he said, referring to all PC vendors and not just Compaq.

However, the researcher said the problem was mainly a "US phenomenon".

IDC analyst Andy Brown agreed. "In fact, this quarter we have seen less channel stuffing in the UK than in recent years. The only vendors that tend to do it in the UK are those such as Packard Bell that rely on the fourth quarter to boost the rest of their financial year," he said.