Compaq, HP, Others Team Up on Net Exchange Co.

SAN MATEO (05/01/2000) - In an unprecedented show of solidarity, Hewlett-Packard Co., Compaq Computer Corp., Gateway 2000 Inc., Advanced Micro Devices Inc. (AMD), NEC Corp. and seven other high-tech powerhouses put their differences aside today to create a new independent company to serve as an Internet exchange.

Along with Infineon, Quantum, Samsung, SCI Systems, Solectron, Western Digital, and Hitachi, the founding members held a news conference that was light on details but high on enthusiasm.

"If you really want to say why we are here, the answer is that this is the Internet at work," said Compaq Chief Executive Officer Michael Capellas. "Just look at the ways it changes relationships. It's open and it came together in the space of three weeks. That's Internet speed."

The companies have agreed to form an online exchange to address the inefficiencies of the supply chain for the computing and electronics industries. They estimate that between 5 percent and 7 percent can be saved with a collaborative, integrated approach to procuring supplies from manufacturers.

Officials at all 12 companies involved claim they were each working on addressing the problem separately when Carly Fiorina, CEO of Hewlett-Packard, picked up the phone three weeks ago to call Capellas. The breakneck speed at which the founding members assembled and the press conference was called contributed to a lack of crucial details at the announcement, such as the company name and management.

But the founding members made it clear there was nothing exclusive about the new company and that it would continue to be an open forum, welcoming additional founding members during the course of the next 90 days. At that time, officials hope to have the company up and running. In addition, companies in any part of the supply chain would be welcome to take advantage of the exchange.

"We have not been turned down by anyone, but there are a number [of potential members] that are making a decision," Fiorina said. "We do have space available for founding members."

Each member will contribute US$100 million from its coffers toward the effort.

The company founders estimate that about $600 billion in parts and components will be sold online over the next few years. Not surprisingly, the founding members also intend to leverage the exchange heavily to reduce their own supply-chain costs.

The as-yet-unnamed company's four tenets include:

-- Lowering manufacturing and purchasing transaction costs through process efficiencies -- Reducing levels of inventory throughout the entire supply chain by better matching supply and demand via the online marketplace -- Increasing customer satisfaction by improving the ability to deliver products more quickly and more predictably-- Providing expertise on supply-chain best practices to help participants achieve better results, from product design to customer delivery.

Compaq Computer Corp., in Houston, Texas, is at http://www.compaq.com/.

Hewlett-Packard, in Palo Alto, California, is at http://www.hp.com/.

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