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By Richard Morochove
First published April 22, 1999
HOUSTON - In the rough and tumble world of the computer business you're only as good as your last quarterly results. And troubled Compaq Computer was set to report lower than expected revenues and profits.
So company co-founder and chairman Ben Rosen did what he had to do. He pushed out the president with tired, old ideas in favour of someone new, Eckhard Pfeiffer. In 1991 Pfeiffer, then head of Compaq's European operations, replaced Compaq's first president, Rod Canion.
That was then, this is now. Last Sunday, under pressure from Rosen and the board of directors, Pfeiffer resigned as Compaq's president, under circumstances eerily similar to those eight years earlier.
A three-man team, consisting of Rosen and Compaq vice-chairmen Frank Doyle and Robert Ted Enloe, will run Compaq until a new CEO and president is chosen.
At last week's Innovate 99, the big user conference Compaq holds once every two years, I sensed something was wrong. On the surface it appeared similar to the other three Innovates I've attended. Some 4,500 of Compaq's best customers came out of the Houston heat into the cool, air-conditioned George Brown Convention Center to attend technical sessions and keynotes from Pfeiffer, Bill Gates and Intel CEO Craig Barrett.
At past Innovates, Pfeiffer used this platform to report on his progress and lay out his next great goal. Compaq will become the world's biggest PC company. Done. Compaq will become one of the world's three largest company companies. Done.
It wasn't just the air that chilled the convention center. Pfeiffer's speech failed to warm the crowd. Pfeiffer pledged that Compaq would become the world's leading Internet company. Yet he offered no way of measuring this accomplishment. Without one, how can you be sure you've reached your goal or even if you're heading in the right direction?
Pfeiffer announced Compaq's new strategy of non-stop e-business, one so unoriginal he felt obliged to note he wasn't stealing another company's terminology.
Yet this is the same hard-driving man who propelled Compaq from a personal computer maker with 3.5 per cent of the PC market and U.S. $3 billion in annual sales to a worldwide computer leader with 15 per cent of the PC market and U.S. $40 billion sales.
In his headlong quest for growth, Pfeiffer juggled a lot of balls in the air and let more than one drop. Early last year, he acquired Digital Equipment to add strength in computer services, planning to complete the amalgamation of operations by December 1998. I think it's still a work in progress.
In an effort to quickly and seamlessly integrate the Digital business, Pfeiffer appointed Digital executives to senior management positions within Compaq. Yet many of these same Digital suits were responsible for DEC's stagnation this decade.
I had a remarkably revealing meeting last week with one, Bill Strecker, now Compaq's senior vice president for technology and corporate development. He's responsible for charting new technology directions and strategic relationships. Within the course of half an hour, Strecker admitted he knew nothing of an innovative PC design from a competitor and managed to give a long-winded non-answer describing Compaq's PC strategy as a "superset of Microsoft's."
Strecker maintained he's confident of Compaq's future prospects. Then why did he sell off 99 per cent of his Compaq shares in February? We'll never know because he refused to answer, dismissing my question as "inappropriate."
A head of R&D who doesn't follow the competition. A senior VP who has so little confidence in his company he dumps virtually all his shares. It's just this type of Digital deadwood Pfeiffer's successor will need to prune before Compaq is back in fighting trim.
Pfeiffer blamed Compaq's profit slump on a general slowdown in the PC business. Yet Intel did better than expected in its latest quarter. Hewlett-Packard CEO Lew Platt, still smarting after Compaq outmaneuvered HP in the services business, went so far as to issue a goading news release saying everything looked rosy with HP's PC business.
Pfeiffer spent so much time integrating Digital into Compaq's operations that he took his eye off the PC business that's been the fount of Compaq's success. Dell and IBM are fighting it out in the commercial PC desktop business by slashing prices. Pre-occupied Compaq got caught in the crossfire.
I still recall the first time I met Pfeiffer up close, in Compaq's boardroom in the Spring of 1992. He outlined an audacious plan to turn the company around. Use low-cost standard parts to mass produce PCs. Slash selling prices to reflect lower costs.
Pfeiffer's plan worked perfectly, turning the then money-losing company into Wall Street's darling as customers clamoured to buy the new PCs.
I came away from Innovate 99 still very impressed by the capabilities of the PC team at Compaq. Now it's time for a new plan and a new man to lead them. CW
Richard Morochove, FCA, is a Toronto-based computer consultant.
Copyright ©1999 by Morochove & Associates Inc. All rights reserved. This work may not be copied or distributed by any means without our prior written permission.
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