Pfeiffer out, but who's in?
By Owen Thomas
Red Herring Online
April 20, 1999
Wanted: A CEO who can run the world's largest PC
maker and answer to a fearsome, active chairman of the
board.
Over the weekend, Compaq (CPQ)
chairman Ben Rosen forced the
resignation of CEO Eckhard
Pfeiffer and hired Heidrick &
Struggles to conduct a search.
Mr. Pfeiffer and Compaq chief
financial officer Earl Mason
resigned over the weekend, after a
disastrous week on Wall Street that
saw Compaq shares plummet to a 52-week low. (Mr.
Mason resigned to take the top job at Alliance Foods, a
Chicago-based food-service company.) Compaq warned
that it would miss quarterly earnings by nearly $300
million, earning $0.15 per share rather than the $0.30 that
most analysts expected.
Mr. Rosen apparently felt a need for
speed: he said that Compaq's
strategy was sound, but needed
better execution. "As a company
engaged in transforming its industry
for the Internet era, we must have
the organizational flexibility
necessary to move at Internet
speed," he said in a statement. "We
must also remain intimately
connected to our markets and
customers. We have done it before.
We will do it again."
Simply connecting may be a tough challenge for
Compaq's new leader. Megamergers with Digital
Equipment and Tandem have distracted the company as it
staved off competition from Dell Computer (DELL). Dell
sells directly to consumers over the phone and the
Internet, a strategy that allows it fatter margins and lower
prices than Compaq, which is burdened with a channel
strategy that keeps it at arm's length from PC buyers.
DUCK, DUCK, GOOSE
It's likely Compaq's board will hire a second recruitment
firm to supplement Heidrick & Struggles' efforts, if only
to widen its range of possible candidates. As an industry
practice, recruiters avoid contacting candidates they've
placed, and Heidrick & Struggles has been active in many
high-profile searches, such as former Motorola executive
Mort Topfer's appointment to the vice chairmanship of
Dell.
Given the favored status of Dell's model in the eyes of
Mr. Rosen, other Dell candidates are possibilities. Joe
Marengi, vice president of relationships for Dell
Americas, could be a dark-horse candidate; before joining
Dell, he was chief operating officer and acting CEO at
networking software maker Novell (NOVL).
Other possibilities in the computer industry are Joel
Kocher, CEO of Micron PC (MICR), who worked at
Dell before joining upstart Apple (AAPL) cloner Power
Computing, which challenged the Mac OS maker with a
direct-selling model; Rick Belluzzo, CEO of Silicon
Graphics (SGI), who was a top executive at
Hewlett-Packard (HWP) before joining the troubled
workstation and server maker; and Jeffrey Waitzen,
president and chief operating officer of Gateway (GTW),
a company that Compaq considered acquiring in the past.
Hewlett-Packard is also looking for a new CEO to
replace Lew Platt, who's nearing retirement age even as
he reorganizes the giant PC maker. Many analysts have
said HP should hire from outside, but the company has a
strong tradition of promoting from within. If HP does hire
an outsider for the top spot, internal contenders -- like
Ann Livermore, chief of HP's enterprise computing
business -- could look for a new gig.
Compaq could also go outside the PC industry. Carl
Stork, Microsoft's (MSFT) general manager of hardware
strategy, is one dark-horse candidate.
And given the need to tighten up manufacturing
operations, a hire from a large industrial concern could
make sense. General Electric (GE) recently reorganized
its industrial systems business unit, naming James
Rogers, formerly CEO of GE Industrial Control Systems,
senior vice president of industrial integration. Once named
by Forbes as a possible successor to GE CEO Jack
Welch, Mr. Rogers may be one of several GE executives
looking outside for the job of a lifetime. Whoever gets the
job will be landing in the hot seat. Compaq's new CEO
will answer to Wall Street analysts angry with past
management's practice of denial about disappointing
earnings. They'll also answer to a board led by Mr. Rosen
-- who showed the same lack of compunction in sacking
Mr. Pfeiffer that he did when he named Mr. Pfeiffer to
replace Rod Canion back in 1991. |
