Stretching IT Budgets with Flexible Financial Solutions

Compaq Financial Services

Stretching IT Budgets with Flexible Financial SolutionsStretching IT Budgets with Flexible Financial Solutions

Anita Brennan


Anita Brennan



Agenda

Compaq Financial Services Overview

Advantages of Financing Technology

Financial Alternatives and Examples

Next Steps


Compaq Financial Services Overview

Compaq Financial Services (“CFS”) is a wholly owned subsidiary of Compaq Computer Corporation

In 1997, Compaq formed an in-house equipment leasing and financing unit, to finance technology solutions for Compaq customers

Headquartered in Murray Hill, NJ we have a dedicated GEM operations and sales organization

CFS custom-tailors leasing and financing packages for the full range of Compaq’s products and services, as well as non-Compaq offerings that might be part of a total Compaq solution


Why Finance Technology?WHAT YOU MAY NOT KNOW: Over 90% of all U.S. corporations and 40% of all government entities finance all or some of their equipment

(ELA 2000) Gartner Dataquest predicts by 2003, 60% of all IT

acquisitions will be leased Leasing provides GEM customers the ability to leverage existing budgets, thereby acquiring more equipment than possible with purchasing Leasing avoids the costs of surplus property disposal 325 million PCs will be obsolete by 2005


Why Choose Alternative Financing…Others

11%

Improve Return3%

Improve Control Assets

2%

Keep Expenses Predictable

8%

Operating Expense10%

Flexibility11%

Avoid Product Obsolescence

32%

Cost Reduction23%


Funding Alternatives Cash • Capital expense funds are limited

• Provides one time solution

Bank Loans • Not willing to assume residual risk• Most do not retain lease paper for their own

accounts - making upgrades very difficult

Bonds • Fee intensive (.5% - 1%)• Very time consuming• One time technology solution• Subject to voter rejection• Poor matching of term vs. useful life


CASH LEASE BONDS

Equipment Cost $100,000 $100,000 $100,000

Financing Cost 7,771 6,560 58,400

(Opportunity Cost = 5.5%)

(36 pmts of 2,939)

(5% 20 yr. Bond)

Disposal Costs 3,000 0 3,000

Total Costs $110,771 $106,560 $161,400

Total Cost of Acquisition


S-t-r-e-t-c-h Technology BudgetsS-t-r-e-t-c-h Technology BudgetsA lease over a cash alternative enables over 3x the A lease over a cash alternative enables over 3x the

number of units deployed on Day 1 of an IT number of units deployed on Day 1 of an IT acquisition.acquisition.

Example: Technology Budget $341,000Example: Technology Budget $341,000

YEAR 1YEAR 1 YEAR 2YEAR 2 YEAR 3YEAR 3

CASH OPTIONCASH OPTION 341,000341,000 341,000341,000 341,000341,000CASH Units/ea yrCASH Units/ea yr 341 341 341 341

341341CASH Units/totalCASH Units/total 341 341 682 682

1,0231,023

LEASE OPTIONLEASE OPTION 341,000341,000 341,000341,000 341,000341,000LEASE Units/ea yrLEASE Units/ea yr 1,000 1,000 0 0 0 0LEASE Units/total LEASE Units/total 1,000 1,000 1,000 1,000 1,000 1,000


Flexible Financing AlternativesFlexible Financing Alternatives

Lease terms ~ 12 to 48 months Various structures ~Quarterly,semi-annual, & annual

payments Cost per seat/Managed Services Plan Technology refresh lease Non-appropriation clause option for public entities Equipment add-on and upgrades can be incorporated

throughout the lease term

Simple application & approval process


Technology Refresh Lease Technology Refresh Lease

Stay ahead of the technology curve Built in ability to upgrade at month 24 or 36 Allows for equipment refresh prior to the end of the

lease term Keeps computer systems current and guards against

technological obsolescence


The Laptop LeaseExample: Based upon acquisition of 75 units

New Laptop$1,500

Buyout

$716 $716 $165

Year 1 Year 2

Over 2 years, pay for less than cost of laptop

$358 perSemester


Q2 Special Offers Q2 Special Offers 0% Free Time Lease:

-- 30 mos FMV, all COMPAQ

-- 24 mos FMV, equipment mix

120 Day Deferral Lease:

-- any term, 1st 120 days no interest, no payment

Single Payment Lease:

-- 36 mos FMV, 95% payment


Next StepsNext Steps

Review Technology Plan Discuss budget issues/financial alternatives with

Compaq and CFS

SOLVE your budget issues TODAY with CFS alternative financial solutions!


Contact InformationContact Information

Stretching IT Budgets with Flexible Financial Solutions

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