Compaq Struggles With Dwindling CEO Candidates, Losing Business
Houston, July 13 (Bloomberg) -- Compaq Computer Corp.'s quest for a new chief
executive is dragging
on longer than some analysts expected and the No. 1 personal computer maker may
lose more money
and customers if it doesn't hire a new leader soon, analysts and investors said.
Two candidates courted by the board, Greg Brenneman of Continental Airlines Inc. and
Ray Lane of
Oracle Corp., took themselves out of the running. Their withdrawals leave Houston-
based Compaq
struggling to find a high-caliber CEO willing to take on the task of turning around a
company where
sales are falling and losses are now expected.
Chairman Ben Rosen ousted CEO Eckhard Pfeiffer in April after a series of
disappointments capped by
a warning that first- quarter earnings would be half what was forecast. Analysts said
lack of permanent
leadership is causing the computer maker to lose customers as it attempts a planned
restructuring,
makes job cuts and loses more top executives. ''It's like a headless chicken,'' said
portfolio manager
Bill Schaff of Bay Isle Financial, which recently sold its Compaq shares at a loss
because of the
situation at the company. ''You can't run a company of that size in a changing industry
without
leadership.''
Compaq warned last month that it expects to have a loss of as much as 15 cents a
share in the
second quarter, its first loss from operations since 1991. Some analysts expect the
losses to continue
through at least the third quarter.
The stock has languished in the mid- to low-20s since Compaq said first-quarter results
would lag
analysts' expectations. From a closing high of 49 1/4 in January, Compaq lost more
than half its value,
falling as low as 21 3/16 in mid-June. Last week, the stock gained 15 percent amid
optimism that the
company will rebound in the second half. Compaq rose 1/8 to 26 9/16 in midday trading
today.
For its part, Compaq won't comment on the status of the search. ''We have no
schedule or timetable,''
said spokesman Alan Hodel.
Second-Half Importance
Getting management in place soon is important, analysts said, because much of the
PC industry's
business is done in the second half of the year, with strong back-to-school and holiday
sales driving
demand. ''The opportunity cost of missing the second half of the year is huge,'' said
analyst Ashok
Kumar of U.S. Bancorp Piper Jaffray. He said Compaq is losing large corporate
accounts because it's
distracted. ''They cannot afford to let someone like Dell (Computer Corp.) into their
accounts.''
Compaq already had been losing sales in corporate accounts in the first quarter,
according to ZD
Market Intelligence, as Dell boosted sales and overtook Compaq as biggest vendor in
that market. Dell
is expected to see sales rise in the second quarter, while Compaq may see further
declines, ZD said.
Rosen is expected to unveil details of a restructuring, including job cuts, when the
company reports
earnings later this month.
Compaq already has streamlined distribution, sold off a majority stake in its AltaVista
Internet unit and
reorganized its sales and corporate structures.
Several of Compaq's highest-level executives have left, including Chief Financial Officer
Earl Mason,
who resigned the same day as Pfeiffer. Senior Vice President John Rando, who ran the
services
business, left July 1; John Rose, head of the enterprise computer business, resigned
last month; and
Michael Heil, head of worldwide sales, left in late April. |
