Last year was not a good year for Compaq. Despite starting 1998 on a high note with the acquisition of Digital, the high growth the company had enjoyed over the previous five years began to slow and problems with quality, service and support have plagued the PC maker, turned computer company, through the year.
Back in March, company chief executive Eckhard Pfeiffer warned that a slowdown in US sales would affect Compaq's second quarter results. European sales were also expected to slow and when the second quarter came the company reported a massive loss of $3.6 billion, which it largely attributed to the costs associated with its purchase of Digital.
However, almost a year after the Digital acquisition business does not appear to booming for Compaq.
Recent figures from IDC showed that despite retaining its lead in the PC server market, Compaq actually lost four points of market share - most likely to Dell - in 1998 and analysts at the company predict that this is likely to continue to lose share this year.
Only days after IDC's report, yet another blow to Compaq has come in the form of a damming customer satisfaction survey from US based Technology Business Research(TBR)
The report, which was based on feedback from 300 Fortune 1000 IT managers in companies with an average of 24,000 employees, reveals that Compaq customers were less than satisfied with the company's offerings throughout the course of last year. The report ranked customer satisfaction with vendor's offerings across notebooks, desktops and Intel servers.
Quality of Compaq's notebooks is still failing users' expectations. This is not the first time that Compaq has experienced problems with its notebooks. Back in June 1997, research analyst Gartner placed the company's Armada notebooks on its Problem Watch status and in the same year another research company, Sherwood, conducted a customer satisfaction report on which Compaq was placed last.
TBR's report states that although the company has improved its price/performance issues and delivery time, they are still underperforming on both overall quality and long term reliability.
The report showed that a number of Compaq customers specifically state that they believe Compaq notebooks are not as durable over time as other vendors' notebooks.
One of the most telling statistics - out of the 23 per cent of companies that had switched notebooks in the last quarter of last year, Compaq was the most likely vendor to have been replaced, due to service, reliability and pricing issues and Dell was the primary beneficiary of these changes.
It was bad news again for Compaq in the server arena primarily in their support offerings.
Respondents who had given vendors low scores were asked to comment on the problems they had encountered. In the area of delivery time, both Compaq and Hewlett-Packard customers complain the most, although in both cases it was mainly the channel that received the blame.
Some Compaq customers had reported that they receive no guarantees on delivery. Customers of Compaq, HP and IBM all complained that the servers are overpriced for the market.
In terms of Compaq's technical support response, where the vendors' score was significantly lower than the competition, respondents volunteered that they believe the vendor did not take proper accountability, that the response was generally poor, and that there was a problem with parts availability.
Technical support for Compaq Intel servers was described as, "poor and slow, with the vendor being difficult to contact and lacking in expertise."
Several customers in the sample also reported that the upgrade path is poor and often find it more cost effective to replace their systems rather than upgrade. Proprietary parts are also a problem.
Other areas of weakness reported were delivery time, cost of ownership and volume discounting.
Julie Perron, TBR primary research manager said that she believed these problems were one of the main reasons Compaq were losing customers to arch rival Dell. "In fact, we found that of all the companies we questioned, almost all those that had switched Intel server vendors in the last 12 months, had changed from Compaq to Dell."
Although Compaq had managed to hold its own in the desktop area, there were still some problems reported. Several Compaq customers mentioned that the desktops do not seem to perform up to spec and that the company's desktops did not meet the national standard.
Gartner Group research subsidiary Datapro has also recently released a customer satisfaction report that showed similar results.
While not as damning as TBR's the report showed Compaq losing out to Dell particularly in the small to medium sized business accounts, an area in which both companies are striving to gain business. The report states that Dell poses a "considerable" threat to Compaq in this area.
In addition, Compaq rated higher than HP for product availability and pre sales support in desktop PCs, but, according to Datapro, these are the least important vendor related criteria.
Datapro notes that one of Compaq's key strategies is to focus on customer satisfaction and it states, "Our survey indicates that the company has good reason to work on this and it will certainly be interesting to see the impact of the strategy over the next year."
Andy Brown, research analyst and PC tracker for IDC, said Compaq is facing increased pressure from Dell, which has placed a great emphasis on service and support.
"Its not so much a bad perception of Compaq themselves, but what is on offer from their competitors. There is a general feeling that Compaq is not as dynamic as Dell and this is probably due to Dell's direct selling model," he said.
He added: "Service and support is fundamental in PC servers. Compaq has admitted to us that this is a problem, they now realise that this is where the margins are, not in hardware."
He said he believed Compaq had begin to tackle these problems. "Last year they set up a call centre in Glasgow and they are planning to offer technical support, in a similar manner to Dell's premier pages. It's an area they have seen they need to act in."
"It's true that enterprise clients see Dell as more reliable and this worries Compaq and they're trying to find some direction. From our figures we do see Dell's rate of growth to be greater than Compaq's but Compaq does still hold the greatest market share. However, without their acquisition of Digital, Compaq would be dead and buried," he noted.
Yeah, sorry about all that, simpers Zuckerberg
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