Wall St. Journal says he was forced out
April 18, 1999
Compaq CEO Eckhard Pfeiffer
Steps Down at Board's Request
By CHRISTOPHER GRIMES
Dow Jones Newswires
NEW YORK -- Compaq Computer Corp. --
simulataneously shouldering Wall Street's anger, the
pressures of a rapidly changing computer market and the
massive buyout of Digital Equipment Corp. -- dismissed
Eckhard Pfeiffer from the chief executive's office.
Two board members, Benjamin M. Rosen and Robert
Ted Enloe III, met Mr. Pfeiffer Saturday to suggest that
the company needed new leadership. Mr. Pfeiffer, 57
years old, officially resigned Sunday.
Mr. Rosen, who is acting as chief
executive, said the board of
directors had thought about
replacing Mr. Pfeiffer for some
time.
"Boards don't do these things
precipitously," Mr. Rosen said in
an interview Sunday evening.
"Under Eckhard's regime, since late 1991, we had
terrific growth for five years. [But] in the last couple of
years, the performance hasn't been as good as it should
be."
Compaq angered many Wall Street analysts April 9 with
a surprising late-Friday afternoon warning that
first-quarter earnings wouldn't live up to expectations.
The following Monday, Compaq shares fell 22%, and
the company acknowledged that it had to work to rebuild
credibility with investors.
Mr. Rosen said the first-quarter problem was "a factor"
in dismissing Mr. Pfeiffer, but not the only one.
"Unfortunately, we had a disappointing first quarter last
year and three years ago," Mr. Rosen said. "It was not an
isolated event."
He said he couldn't say right now how the first-quarter
problems could have been handled better. "That's
something we're going to look into," Mr. Rosen said.
"We don't have all the details of the quarter, but
certainly I'm disappointed by the reaction to it," he said.
Some on Wall Street said Compaq's troubles stemmed
from the $9 billion Digital acquisition, which was
completed last summer. But Mr. Rosen said the board
"on balance [is] very pleased with the acquisition and
the progress so far."
But he said it's understandable for investors to be
concerned about the DEC integration. "As we get into
this ... we want to change the view of the Digital
acquisition."
He said Digital brought to Compaq a successful services
organization, plus Alta Vista, the Internet search engine
expected to go public later this year.
Mr. Pfeiffer, who is German, joined Compaq in 1983 to
head the fledgling personal-computer company's
European operations. He became chief executive in
1991, succeeding co-founder Rod Canion, who had
drawn criticism himself.
Compaq, the world's top PC maker, has had problems
matching the efficiencies of fast-growing rival Dell
Computer Corp., which sells computers directly to
customers. Compaq has realigned its inventory,
manufacturing and distribution processes several times
over the last few years, often achieving mixed results.
Further, PC prices continue to fall rapidly, putting a
squeeze on profits.
Compaq also said Sunday that Earl Mason had resigned
as chief financial officer.
Mr. Mason, 51, attracted criticism from Wall Street, too.
Some said privately that he was too optimistic in his
guidance to them. And many were upset in February
when a group of visiting investors were told that the
Compaq was seeing weakness in some markets. To some
analysts, this seemed like selective disclosure.
But Mr. Rosen said the timing of Mr. Mason's departure
was a coincidence, adding that Compaq did not ask for
Mr. Mason's resignation. Mr. Mason was thought to have
left to head a food-service concern in the Midwest, and
a press release is expected from that company early this
week.
Compaq hired executive search firm Covoy Sur to seek
out Mr. Mason's replacement and Heidrich & Struggles
to replace Mr. Pfeiffer.
Mr. Rosen, who lives in New York, will stay in Houston
during the week while he acts as CEO. The company
formed the office of the chief executive, consisting of
Mr. Rosen, Mr. Enloe and director Frank P. Doyle, who
came to Compaq from Digital.
Compaq shares, which traded as high as $51.25 this
year, dropped 23% on April 12, the first day of trading
after the announcement. Compaq closed Friday at
$23.625.
Compaq said that heightened competition and
disappointing sales of its most profitable computers will
result in net income of about $250 million, or 15 cents a
share, for the quarter, Compaq said. That was well
below the already-lowered consensus estimate of $560
million, or 32 cents a share, held by Wall Street
analysts. Revenue was projected at $9.4 billion, $100
million to $400 million below analysts' projections |
