This is how the UK (and probably Europe's) leading financial newspaper sers COMPAQ (thanks to helpinout for referring it).
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The fall of a high-tech hero
The fall of Eckhard Pfeiffer, who has resigned as chief executive of Compaq Computer, shows American capitalism at its most cold-eyed, bruising and unsentimental. And it is a healthy sight.
Until Sunday, Mr Pfeiffer was one of the most prominent businessmen in the US, widely admired for his turnround of Compaq. Catapulted into the top job in 1991, when the company announced its first quarterly loss, he presided over its growth from a business with $3bn (£1.8bn) of annual sales to some $40bn, and its expansion into a full line computer company.
The proximate cause of his resignation was a profits warning last week that surprised Wall Street analysts, already on poor terms with the company. In a cutting edge, high technology industry, where share price valuations are extremely volatile, companies ignore good communications with the broking community at their peril.
But behind the profits warning - which the company claimed reflected industry-wide trends - appear more deep-seated problems of strategy and execution specific to Compaq.
One of the most serious is its difficulty in changing its personal computer business model to cope with the direct selling methods pioneered by Dell Computer, which are more suitable for a commodity product. By eliminating a layer of middleman dealers, and building to order, Dell has achieved far greater flexibility in pricing and inventory control. Compaq has fumbled its attempts to move in this direction.
The company, which has jumped in size over the past two years through the acquisition of Tandem Computers and Digital Equipment, may also have been slow to get a grip on these new businesses, particularly Digital.
All this suggests that while Mr Pfeiffer was an excellent manager of the company's growth in the mid-1990s, he may not have the ideal skills to oversee the much more complex period of evolution with which it is now grappling.
Matching executives' strengths to a company's growth is hardly a problem unique to Compaq. Any fast-growing business can face a potential mismatch. But many companies are not prepared to act toughly. The temptation is to avoid embarrassing confrontations with corporate heroes, in the hope matters will right themselves. In many sectors, companies can still live off past laurels for a considerable period of drift and decline.
Not so in an industry as fast-moving and open to new entrants as US PCs. The results may seem brutal. But US executive pay levels should more than compensate for an uncertain life at the top, and a willingness to embrace ruthless change is one of the strengths of American industry's competitive creativity. |
