Originally created 01/30/98

Compaq replaces IBM at store

NEW ORK -- Call it the Big Boot.

Compaq, slighting IBM for a second time this week, has talked Radio Shack into replacing Big Blue personal computers with Compaq PCs in the nation's largest consumer electronics chain.

The announcement Wednesday came just two days after Compaq Computer Corp. agreed to buy Digital Equipment Corp. in a threat to another big IBM business: helping firms set up, run and service their computer networks.

Analysts said the separate strokes by Compaq show the scrappy company is swiftly reaching its goal to rival International Business Machines Corp. as the world's dominant supplier of a spectrum of computers and services.

Already the No. 1 maker of consumer PCs, Compaq's deal with Radio Shack exploits IBM's sluggish reaction to a profound shift in consumer buying behavior -- PCs that cost less than $1,000.

"They missed the initial wave of low-cost systems, which really hurt them and slowed down their momentum considerably," said Kevin Hause, an industry analyst at International Data Corp., a San Francisco-based research firm.

Radio Shack's 7,000 stores will start selling Compaq Presarios instead of IBM Aptivas in March. Compaq also has designated the Fort Worth, Texas-based company, owned by Tandy Corp., as the official service provider for all its consumer PCs, not just those bought at Radio Shack.

IBM's sales of PCs began to rebound late last year with the introduction of its first computers below $1,000, a consumer trend that began nine months earlier. Its overall PC sales rose 17 percent last quarter, according to International Data Corp., compared to more than 40 percent growth for Compaq, one of the first major computer companies to sell sub-$1,000 PCs.

But IBM's cheapest Aptiva in Radio Shack stores, at $1,100, wasn't introduced until early this month. As it did with IBM, Radio Shack asked Compaq to configure its PCs uniquely for its stores.

Analysts said IBM's strategy of stressing pricier machines with more features clashed with Radio Shack, whose buyers focus on electronics gear and maybe an inexpensive PC.

"They're not the sophisticated PC shopper you'd find at CompUSA or Computer City," said David Goldstein, president of Channel Marketing, a Dallas-based research and consultant firm.

Despite the large number of Radio Shack stores, IBM officials said that by the end of last year Radio Shack accounted for less than 10 percent of total Aptiva sales.


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