WSJ:
Compaq Computer Corp.
When Compaq Computer announced plans to place a 35-foot-long neon
sign atop Hong Kong's skyline -- alongside such household Asian names
as NEC, Toshiba, Canon, and Sharp -- it was more than a bold
advertising stroke. It was a sign that Compaq, already the world's No. 1
personal-computer maker, would aggressively pursue business in Hong
Kong, the gateway to the rapidly expanding Chinese market.
That's not bad for a company founded less than 20 years earlier in a pie
shop.
Compaq -- which took only four years to go
from start-up to Fortune 500 status -- says that
in the year 2000, it wants to have $40 billion in annual sales and be one of
world's top three computer makers. Aside from fighting for market share
in Asia, Compaq is attempting to expand into new product lines, most
recently by agreeing to buy Digital Equipment, a maker of high-end
workstations and a services giant, in a deal worth more than $9 billion.
Compaq was founded in 1982, as the market for clones of IBM personal
computers gathered steam, by Joseph Carion and two other former
engineers of Texas Instruments, James Harris and William Murto.
Compaq shipped its first IBM clone that same year, and also showed
itself as more willing to innovate than other PC cloners, as it unveiled a line
of PC-compatible portable computers (though at nearly 30 pounds,
Compaq's machine was dubbed "luggable" instead.)
The mid-1980s were perilous times for
PC-clone makers. Every small clone maker
was one unsuccessful product away from
going under, and even after a hot first year in
which it posted net income of $4.7 million on
sales of $111 million, Compaq was no
exception.
But despite the dangers of its market,
Compaq stayed healthy. It understood the
value of old-fashioned media hype,
outspending competitors on glitzy ads
featuring the likes of the Pointer Sisters, and
remained dedicated to keeping pace with
IBM -- and then to reaching the next technical
milestone ahead of Big Blue. After staying
roughly even with IBM on introductions of
286-chip machines, Compaq leaped ahead
with a PC based on Intel's more powerful 386
microprocessor, which allowed limited
multitasking. By getting to the market first with
the 386 processor, Compaq was able to
maintain strong profit margins and stay above
the price-war fray.
The nationwide recession in the early 1990s
hurt Compaq, and shook up the computer
industry. In October 1991, Rod Canion, the
only president and chief executive officer
Compaq had ever had, was ousted after a
marathon directors' meeting. Mr. Canion, the
seemingly unassailable king of one of the computer revolution's most
storied companies, was succeeded by Eckhard Pfeiffer, who had built
Compaq's European business into a $2 billion operation before being
invited back to Houston to act as Compaq's chief operating officer. Mr.
Pfeiffer remains the president and CEO.
The move signaled Compaq's understanding that it had to move more
swiftly to adapt to the new economic reality of the PC business: brutally
short product cycles, seemingly endless price wars and squeezed profit
margins. Compaq launched a bruising price war with its rivals in 1993,
drastically chopping prices on 386 and 486 machines. The next year it
pulled ahead of IBM and Apple Computer for good in 1994 to become
the world's leading PC maker.
Today, the company continues to meet the challenges posed by the
fiercely competitive PC market. It has made moves to battle Dell
Computer in the corporate market, and moved to emulate Dell and
Gateway 2000's more efficient model of building PCs as orders come in
instead of relying on quarterly forecasts. That change in strategy came after
Compaq's efforts to acquire a direct marketer -- with both Gateway and
Micron Technology's PC-sales unit being wooed -- came to naught earlier
in the year.
In January 1998, Compaq made its boldest move yet: a $9.42 billion deal
to acquire Digital Equipment. The move puts Compaq in a position to
move beyond PCs into two new realms: high-end computing -- Digital
makes powerful workstations and Internet servers -- and servicing
computer operations for big companies, which alone is estimated to bring
in about $6 billion a year for Digital.
The deal should also help Compaq improve its somewhat-tarnished
reputation for services. While Compaq has lacked credibility among chief
information officers at major companies, Digital had courted that crowd
for decades. |
