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The Rodney O. Lain Archive

'Is CompUSA Going Out of Business?' or 'Can/will CompUSA Reinvent Itself?'

Rodney O. Lain - 1999.08.26

This article was originally published on The iMac.com, a site which no longer exists. It is copyright 1999 by RAC Enterprises, which also seems to no longer exist. It is thus reprinted here without permission (which we would gladly obtain if possible). Links have been retained when possible, but many go to the Internet Wayback Machine.

I heard CompUSA was going out of business?
 - A Best Buy employee, overheard in a bar

But we've always done it this way!
 - Seven last words of a dying company

[CompUSA is] getting the crap beat out of them quarter after quarter financially."
 - Roger Kay, analyst with International Data Corporation

Replace the word "CompUSA" with "Apple" in those types of comments, and that puts into proper perspective. Apple bounced back. So will CompUSA
 - A Minnesota Apple rep that I had a conversation with about this

I have avoided writing this column for a long time.

You see, I work at CompUSA and therefore have a hard time giving the company a totally honest critique, due to the obvious conflicts of interest. But since no one else on the Mac web sites appears to be concerned with anything other than the iBook lately, I am compelled to speak up and do my duty as a good little columnist...

One of the popular maxims incessantly preached to us in Journalism School is that the journalist's job is "to comfort the afflicted and to afflict the comforted." A sarcastic comment, this is - if you concentrate solely on the meaning of the last phrase. The journalist's job, some believe, is to make the rich, fat cats uncomfortable every now and then by pointing out their foibles, reminding them that they are not infallible, that they are not the untouchables. The fat cat could be a corporation, a mogul, or both, in the case of that latest media whipping boy, William H. Gates, III, and his Microsoft Corporation.

But there is another fat cat that hasn't really been publicly discussed that much. I am talking about CompUSA (NYSE symbol: CPU). Now, I don't know if you know this, but CompUSA has not been at its financial zenith for a good while. And Mac users should be concerned, for reasons I hope to argue cogently. Check this out...

Lest We Forget

For the past year or so, many Mac-centric columnists (me included) have egocentrically trashed CompUSA, saying that Apple products aren't showcased on par with the Wintel stuff. But think about this for a moment: how far would Apple have gotten without shelf space in this self-styled "super computer store"?

I think that, second only to Microsoft, CompUSA is the most important third party in Apple's recent turnaround. Just where do you think iMac buyers purchased their Bondi-blue bundles of joy over the past 12 months - I mean, other than Best Buy, mail-order houses, on-line resellers, and independent Apple Authorized Resellers? Yep, CompUSA. For those of you living in the hinterlands, CompUSA has a big presence in the major U. S. metropolitan areas and in the computer-shopper's consciousness; hence, Apple has a big(ger) presence there, too. And Mac sales figures at CompUSA (which rose from a mere 2% to 15% after implementing the Apple Store-Within-A-Store) are not to be overlooked nor taken for granted.

True, some CompUSA locations need more Mac-knowledgeable sales staff. Yes, some stores need to carry more Mac software and peripherals. Granted, some stores need to give more attention to their Mac section. But we should be grateful that they have the peripherals, software, and staff that they do have. CompUSA should be complimented for allowing Mac users to have a superstore to shop in.

CompUSA has been a boon to the growth of Apple's market share (being the only national chain with Apple's blessing doesn't hurt either). And, again, Apple hasn't been too bad for CompUSA's bottom line (I remember one weekend that I worked at CompUSA, I noticed that if it were not for the PowerBook and iMac sales, revenue would have been piss poor that weekend; abysmally piss poor).

So, for the time being, the assured success of the Mac is tied to the success of CompUSA. That's why we need to be mindful of the stock symbol CPU just as much as we watch the wax and wane of APPL's fortunes.

How Bad Is 'Bad'?

Beneath Apple's success at CompUSA, problems are afoot (see the end of the article for more news links). But it isn't just CompUSA. Every brick-and-mortar computer store is being affected by razor-thin profit margins that have resulted from computer makers' race to produce the cheapest PC.

But it appears that CompUSA is affected more than the others are. Sears and CompUSA sell more than just computers, so a recession in one type of product doesn't hurt them that much. But CompUSA sells nothing but computers and computer-related products. Therefore, so goes the PC industry, so goes CompUSA.

And it's reflected in CompUSA's stock price nowadays.

Over the last eight years, the highest CompUSA's stock price has ever been is right below $40 a share. The lowest it been is below $5 a share. As of Friday, August 20, it trades at $7 a share.

In that respect, the mighty has fallen.

What surprises me is that more people aren't talking about CompUSA's future and its fortunes (remember all of those "Apple is dying" articles, as APPL fell to $12 a share?). I don't say these things out of glee. I am concerned about CompUSA health (maybe it's because I hate Best Buy with a passion; I don't know). I do know that I am rooting for CompUSA - at least until Apple addresses the future of its own retail channel strategy.

Until then, CompUSA has its work cut out. For example, it's hard to get good, quality employees. It's hard to make money if your bread and butter (the PC) keeps getting cheaper and cheaper, reducing your profits. They also have to deal with customer dissatisfaction, stiff competition from the Internet retailers, and the evolution of the PC industry, as it moves towards embracing the digital-appliance model as the replacement of the beige box approach.

Discuss It Amongst Yourselves...

I was going to pontificate about what CompUSA should do to right itself, but who am I kidding? I have no crystal ball. I have no MBA. But I do know that CompUSA will have to perform some minor miracles and make some hard decisions in the upcoming months and years...

Meanwhile, what are your thoughts on this topic? Take some time and e-mail me your thoughts, or post tell me in The iMac.com forums. Me, I wish CompUSA the best. A turnaround for them is possible. Hang in there, guys. You can do it.

Apple did. And they had the whole Wintel duopoly wishing them ill will. At least the industry is one on your side, CompUSA.

For those wanting more background info, be sure to read these articles, some of which were quoted above on CompUSA's financial health and the future of computer retailing:

Editor's Special Announcement: Did you like this editorial? I always love Rodney's view of our world, as I'm sure you do, too. Well, if you want a double dose of Rodney every week, then you must subscribe to The iMac.com Newsletter. There will be a bonus column from Rodney every week in the newsletter, so sign up now. Hope you join us - over 10,000 subscribers can't be wrong! [Editor's note: If you have these bonus columns, please email them to Dan Knight - thanks!]

Rodney O. Lain, a former university English and journalism instructor, works full-time as a software developer and works part-time at a local CompUSA Apple Store Within A Store. A card-carrying member of the local Macintosh User Group Mini'app'les, Rodney writes this column exclusively for theimac.com. His greatest desire is to become an African-American Guy Kawasaki. A self-professed "workaholic writer," he waxes prolifically about race, religion, and the "right OS" at "Free Your Mind & Your Behind Will Follow", his unabashedly pro-Mac website. When he's not cranking out his column, he collects John Byrne comic books, jogs, and attempts to complete his first novel. He lives in Eagan, Minnesota, a southern suburb of St. Paul.

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