Here's something nice to read on a day like today:
Compaq's Return
March 23, 2000
Many laughed at Compaq when its acquisitions of
Tandem and Digital appeared to sour. The rap:
The company was diverted from the task at hand
-- selling PCs direct in the Dell model. Surprise!
Compaq's scale strategy and new leadership
position it for a resurgence.
by George F. Colony
I headed down to Houston recently to visit with Michael
Capellas, the new CEO of Compaq, and his team. I hadn't been
at the company since the bad days of the summer of 1998 when
Eckhard Pfeiffer, the former CEO, was in the belly of the beast
attempting to integrate the newly acquired Digital and Tandem
into the Compaq organization. Back then, times looked bleak:
Dell was touting its direct selling strategy, which looked all the
more prescient with the coming of the Internet. A malodorous
1999 followed, both financially (the company lost money, net of
divestitures) and organizationally (Pfeiffer and other executives
were cut).
REDEMPTION
So what did I find in Houston? Here's how I see the company:
Capellas has the right stuff to guide Compaq. First, he
has a clear strategy -- no complex architectures or
Web-babble. This guy can communicate. Second, he is a
techie. He actually understands his products and how his
customers use them. And third, he has a fast, informal
style that is a refreshing contrast to the tight-headed
Pfeiffer regime and a better match for an Internet-era
company.
Compaq's message is clear. "We are not a PC company.
We offer systems that help companies scale their
eBusiness efforts." Compaq can play in three parts of a
company's eBusiness technology: 1) at the transactional
core; 2) at the Web server and applications level; and 3)
at the desktop. The company's Alpha systems (from
Digital) and Himalaya (from Tandem) give it the strength
to pull off this strategy.
The vibes feel right. The last time I was at Compaq,
there was palpable tension with ex-Digital employees --
the place had the pall of a loser. Today's troops have new
energy; there is a tone of ". . . we know where we are
going, and we are going to win."
More innovation, less yadda yadda about
architecture. The stripped-down iPAQ desktop system is
the first of many devices (some quite far from the PC
business) that Compaq will be introducing this year.
Capellas is releasing the talent within the Digital and
Compaq engineering corps to build risky, cool new
technology. Watch for some off-the-wall product risks
over the next 12 months.
ANALYZING COMPAQ
Undoubtedly, this company is coming back. Leadership, strategy,
and products are aligned. But two questions remain: 1) Is
Compaq no longer in the high-value portion of eBusiness
technology?, and 2) can Compaq survive the emerging "Dot Com
cartel"?
Compaq may fight its way back into an increasingly irrelevant
business. Yes, servers, PCs, and storage systems constitute a
big part of eBusiness technology expenditures. But corporate
planners increasingly view this part of their domain as
commodities. They spend time focused on reforming supply
chains, security systems, personalization, and commerce
systems -- not on the underlying platforms. In other words,
Compaq could return as an aggressive and smart company at
the wrong end of the value chain.
A second challenge faces the company. When Forrester surveys
the technologies deployed by Dot Coms, we increasingly find
four vendors: EMC, Cisco, Oracle, and Sun. These players recur
in heavy content and commerce sites -- to the point where they
could become the next dominant cartel -- replacing the Wintel
monopoly that has dominated for the last 20 years.
What can Compaq do? Simply stated, stabilize and innovate.
Make a comeback into the core of eBusiness technology while
simultaneously pushing into high-value, emerging markets,
particularly with new IP-enabled, wireless devices. This
"two-track" strategy will ensure that Compaq remains
competitive in its traditional businesses and is poised to invent
and exploit new markets. The former bureaucratic leadership of
Compaq couldn't have those dreams -- Capellas can.
This document is relevant to the following lenses:
Corporate Technology
Internet Commerce
Applications, Development, & Data
Computing, Networks, & Communications
IT Leadership
Consumer Technology
European Corporate Technologies
For more information about any of Forrester's lenses, contact
us.
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