Fresh off its acquisition of Digital Equipment Corp., Compaq Computer turned its sights back on the consumer market, winning an exclusive deal to sell personal computers at retail giant RadioShack.
Prior to the agreement, which came after a competitive bidding process, RadioShack had only carried PCs made by International Business Machines.
RadioShack executives said Wednesday they didn't anticipate a major shift in their sales mix as a result of the deal but suggested Compaq had made an offer that provided richer profit margins.
Leonard Roberts, president of both RadioShack and its parent company Tandy Corp., said he expected the deal to result in increased profits on computer sales - although he expects volume to hold steady at 10 percent to 12 percent of the chain's overall sales.
"We've worked very hard and tried to manage our business at the 10 to 12 percent level for computers," Roberts said. "We're looking to maintain that level but maintain it at a more profitable level."
Compaq PCs are expected to reach RadioShack shelves in March, executives for the two companies said. Compaq will produce systems across a range of prices that will be uniquely configured and branded for RadioShack. The retail chain, which has about 7,000 locations in the United States, was also named an authorized service agent for Compaq's complete line of business and consumer PCs.
Specific financial terms of the multiyear agreement were not disclosed, but the deal does include an agreement between Compaq and RadioShack to outfit "stores-within-stores" the way RadioShack currently retails Sprint products and services.
"We have high hopes for significant impact in sales of Compaq consumer PCs and for gains in market share," Compaq CEO Eckhardt Pfeiffer said, speaking to reporters and analysts on a conference call from Paris.
Compaq finished last year as the clear leader in personal computer sales. The company's aggressive push in selling systems priced less than US$1,000 was a key factor in its higher unit-volume sales and forced competitors to produce competitively priced systems of their own.
For IBM, RadioShack's decision may mean Compaq's footsteps are just a little louder as that company charts a fierce growth path that has pulled it into second place in terms of worldwide computer sales.
Still, IBM is twice the size of Compaq even after the Digital acquisition, and a spokesman said the company did not foresee any meaningful damage to its business as a result of the RadioShack loss. IBM retails its PCs through a number of chains, including OfficeMax Inc. and CompUSA.
