Evening Captain,
Looks like E.P. taking some major heat.
Pfeiffer turned Compaq into No. 1 PC maker
April 13, 1999 05:23 PM
In HOUSTON story headlined "CEO Pfeiffer turned Compaq into No. 1 PC
maker", please read in second paragraph "...earnings for the first quarter would
fall far short of Wall Street expectations..." instead of "...earnings for the first
quarter would fall far short of Wall Street earnings..." (correcting earnings to
expectations).
A corrected story follows: By Andrew Kelly
HOUSTON, April 12 (Reuters) - Eckhard Pfeiffer, who turned Compaq Computer
Corp into the world's top personal computer maker, appears to have stumbled, at
least temporarily, in the face of two major challenges he has taken on
simultaneously.
Compaq CPQ announced late on Friday that its earnings for the first quarter
would fall far short of Wall Street expectations, triggering a sharp slide in its
stock on Monday.
Compaq's German-born chief executive attributed the shortfall to slack demand
and intense price competition, but Wall Street analysts said two other factors
were also in play.
Firstly there is the integration of Digital Equipment Corp., acquired last year for
$8.4 billion, which analysts said appeared to be proceeding less smoothly than
expected.
Then there are Compaq's troubled efforts to develop "direct" telephone and
Internet sales without alienating the network of independent dealers on which it
has traditionally relied.
"Pfeiffer has tried to do everything at the same time and now he's having a few
hiccups," said David Wu of ABN AMRO.
Some analysts said it would be unfair to write Pfeiffer off because of a
disappointing quarter, given his previous record.
"His track record is very good. He ran Europe very well and he came back and
saved Compaq," said Wu.
However, Compaq's current difficulties contrast sharply with past triumphs under
Pfeiffer's stewardship.
"On paper ... acquiring Digital at a reasonable price seemed smart. But the devil
is in the details, and there have been few successful large technology mergers,"
Merrill Lynch analyst Steven Milunovich wrote in a research report on Monday.
The Digital acquisition was central to Pfeiffer's plans to make Compaq one of the
biggest players in powerful business computers to augment its leading position in
PCs.
Milunovich also faulted Pfeiffer's response to the strong PC sales that
fast-growing competitors such as Dell Computer Corp. DELL and Gateway Inc.
GTW have achieved by using the telephone and the Internet to deal directly with
customers.
Compaq has decided to cultivate these direct sales channels while retaining its
traditional sales channel through wholesale dealers and computer retailers.
"We think that Compaq's hybrid model of part direct and part indirect is not
working well and that it continues to experience growing pains," Milunovich wrote.
Pfeiffer was appointed chief executive at Compaq in 1991 and led the company
through a dramatic turnaround after it had appeared to be losing its direction.
Under his stewardship, Compaq increased its share of the worldwide PC market
from 3.5 percent to 15.4 percent and along the way supplanted International
Business Machines Corp. IBM as the world's biggest PC manufacturer.
In 1996, Pfeiffer developed plans to enter the "enterprise computing" market and
compete with the likes of IBM and Sun Microsystems Inc. SUNW to provide
powerful computers and information technology services to business customers.
The following year those plans took shape with the acquisition of Tandem
Computers, followed by Digital in 1998.
Pfeiffer, now 57, gained a Masters of Business Administration degree from
Southern Methodist University in Dallas and spent 20 years in various
management roles with Texas Instruments Inc. TXN before joining Houston-based
Compaq in 1983.
He established Compaq's presence in Europe, Asia, Australia and Latin America
and later assumed responsibility for worldwide sales, marketing and
manufacturing before being appointed President and Chief Executive Officer in
1991.
((Houston bureau +1 713 210 8508)) REUTERS |
