Compaq Digs Into Its Pocket (Device)
2/5/01 8:48 AM
Source:NYTSYN (New York Times Syndicate
Michael Capellas has an eye for a gimmick. At the World Economic Forum in Davos last month, the chairman of Compaq arranged for each of the visiting dignitaries to be presented with one of the computer company's new iPAQ hand-held devices.
Apparently, the machines were very popular - especially the facility which enabled users to call up photographs of fellow delegates, thereby avoiding those embarrassing moments when names become elusive. Indeed, it is said that the only person to turn down the gift was Michael Dell, head of Compaq's eponymous main rival.
``The first person I met at Davos was our project manager,'' says Capellas, who only gravitated to the top of Compaq last September. ``At least 300 of the most prestigious world leaders were ready to turn the device on and he did look a little nervous. But everything went fine. It worked perfectly.''
Capellas is eager to play down the rivalry with Dell, his traditional adversary in the cutthroat PC market which used to be Compaq's bread and butter. Under Capellas's open regime, which contrasts with his secretive predecessor, Eckhard Pfeiffer, Compaq is rapidly diversifying away from this commoditised market into the more exciting pastures of wireless computing.
Its weapon is iPAQ, which allows users to do anything from accessing the internet and sending e-mails to setting up spreadsheets and finding directions. This time next year the devices, which are the size of a small, thin notebook, will even incorporate a mobile phone. It is little wonder, then, that Capellas is unmoved at the prospect of ceding the PC market to his arch-rival.
``When it comes to PCs, we're as competitive as anybody, but it's not a matter of market share for market share's sake,'' he says, in reference to the vicious cost-cutting which Dell Computers has instigated.
Nevertheless, these are testing times for Compaq. Last month, the company reported a loss of $672 million in the final quarter after writing off $1.8 billion of internet investments. Sales of PCs are suffering from the global economic slowdown which prompted the US Federal Reserve to cut interest rates twice in January. And Compaq is even struggling to shift its iPAQ machines -- although that is because its suppliers cannot keep up with the demand, says an unflappable Capellas.
If nothing gets him down, it may be because of the unusual figure he cuts at the summit of the global computer industry. Unlike Dell, Bill Gates, Larry Ellison and their ilk, he lacks the sensitivity and ego of men who have built from scratch monolithic companies in their own image. Conversation with 46-year-old Capellas is more of a two-way process than ``dialogues'' with his more feted rivals. Where others dictate, he prefers to persuade.
An accountant by training, Capellas worked in steel and oil before joining Compaq in 1998 via Ellison's Oracle. It is a background which seems to equip him with a more detached view of the industry.
``Every time we devise a business, we have to cannibalize the devil out of it in the next three years,'' he says in reference to the prevailing speed of technological turnover. ``Most of the stuff which will be driving this industry in three years' time has not even been designed yet.'' Nor is he planning any set-piece deals along the lines of HP's aborted $18-billion bid to acquire the consultancy arm of PricewaterhouseCoopers. Yet, having drastically reduced his company's exposure to its traditional function of selling PCs, it would be foolish to underestimate the changes which he has wrought at Compaq.
Perhaps Capellas finds it easier than others to move with the times, but that is not to say he underestimates his opposition which encompasses just about the entire IT industry.
``Only the paranoid survive,'' he says. ``I'm paranoid about a lot of things. This industry attracts the best and the brightest and there are lots of competitors. We operate in a lot of markets and we have to stay focused on execution. That's how you've got to jump in, day in, day out.''
Nevertheless, Capellas perhaps benefits from working in Texas, away from the hot-house of Silicon Valley. Indeed, he even went to the lengths of opposing the break-up of Microsoft during its anti-trust case. Hardly a view which Ellison would share.
``We've made it fun to work here,'' Capellas says, almost credibly. ``Morale is high. It's okay to have fun. I feel pretty good about that.'' So much so that former Compaq executives who left to ride the internet wave are being welcomed back in their hundreds. There is, it seems, much to be optimistic about. The global economic slowdown will be short and sweet, Capellas believes, thanks in part to George W. Bush's accession to the US presidency.
``There's no question that we'll see a first-half slowdown in the US which is particularly hard on the PC market,'' he admits. ``But we're all hoping for a quick and decisive move on taxation. Roughly defined, that means a tax cut which has to be enough and targeted at the middle-market. We need to get enough of a change to the tax burden to alter consumer confidence. I had dinner with 12 major UK customers last night and none of them said they had any intention of cutting their budgets.''
A buoyant economy notwithstanding, there are plenty of obstacles ahead for Capellas - dubbed by some critics as an old-economy fish in a new economy pool. The market which iPAQ has been earmarked to crack is being contested by just about everybody remotely connected to the IT industry.
Last week, the UK's Psion fell at the first hurdle in this race to ``bring the internet to your pocket'' after a US partner, Motorola, pulled out of its team. Compaq is likely to compromise by striking a deal with a large cellular phone operator to pool the best in internet and mobile phone technology.
But Capellas is realistic about the likelihood of outright victory.
``Are we big and global enough to impose our standard on the rest of the world? No,'' he says, before adding: ``Is anyone else? No.''
----
(The Independent Web site is at independent.co.uk
(Distributed by New York Times Special Features)
c.2001 The Independent, London |
