Thomas Sternberg, CEO of Staples

This is a partial transcript from Your World with Neil Cavuto, November 26, 2001.

NEIL CAVUTO, HOST: Let me explain, as simply as I can, the one big reason why technology bulls are bullish. For most of them, it's called Windows XP.

The logic goes something like this: Microsoft's new operating system will bring more people into stores to buy not only the software, but the logic goes, other software and hardware, like PCs, especially PCs loaded with XP.

Now, is this happening? Who better to ask than the head of office retail giant Staples, Thomas Sternberg.

Good to have you, Thomas.

THOMAS STERNBERG, CEO, STAPLES: Good to be here, Neil. How are you?

CAVUTO: Good. What are you noticing?

STERNBERG: Well, you know, the first thing is that Windows XP itself has been a roaring success. We've sold about 100,000 copies in the United States alone, and a lot more than that worldwide. As a matter of fact, for a couple of weeks here, we've actually been out of stock on some of the editions and not been able to keep them in stock. So that has been the good news.

The supporting thing is, it has not yet dragged hardware sales along with it. Our PC sales remain soft, as you know, we're moving toward a build-to-order model, kind of like a Dell, with our partners Compaq and HP.

CAVUTO: So in other words, the computers that have XP pre-installed, which is, a lot of the technicians say, the easiest way to get this now, they're not doing that?

STERNBERG: They're not really picking up. I think part of it is that the computer manufacturers, for understandable reasons, have been spooked, and have not invested appropriately into the building sales category right now, while there is a tremendous opportunity. XP really raises the experience level of the PC user to a higher level -- more reliable, much easier to use digital images, streaming video, streaming audio. It's a lot easier for klutzes like me to use a computer, and it would be great if the manufacturers made that clear to the customers.

CAVUTO: I always thought you had people using the computer for you, but I guess that's different.

Let me ask you, I notice when I go into computer stores, stores like your own, I see a lot more traffic. Now, is that just me noting something that isn't necessarily anecdotal, or is there something going on?

STERNBERG: Our consumable sales are actually quite strong. As we announced in our last quarterly conference, our consumable sales were actually up 6 percent year over year, on a like-store basis, which explains the strong traffic you're seeing. As a matter of fact, our customer counts in like stores are up as well.

Unfortunately, the big durable goods purchases, those that can be deferred, and you may not make until you are hiring somebody or building a new office or something, are not moving forward. I think the languishing, to a large degree, with the economy and the customer feeling they don't have to buy the new PC, and it would be great if we get some impetus behind that, because it really would be a terrific addition to their offices.

CAVUTO: All right. Thomas Sternberg, thank you very much, from Staples. Good luck this holiday season.

STERNBERG: Thank you.

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