"But whatever course it pursues, observers say Compaq will remain a powerful force in the computing industry" Compaq: Rooster or feather duster?
By Michael Fitzgerald, ZDNet
Eckhard Pfeiffer's fall from grace as CEO of Compaq just shows that in one day you can go from rooster
to feather duster.
The question now: Which represents Compaq's fate?
Since the company dumped the man who had led it to the No. 1 position in PC sales -- and was trying
to prime it for a run at the top position in computing -- Compaq Computer Corp. (NYSE:CPQ - news)
has now become something of an enigma.
Compaq could continue to follow the course Pfeiffer championed, aiming for enterprise computing
dominance. It could refocus on the Internet. Or it could choose some other path, based on the best use
of its considerable resources.
But whatever course it pursues, observers say Compaq will remain a powerful force in the computing
industry.
"There's no way you can say they're in crisis, in the sense that you're talking about a dinosaur," said
Tim Bajarin, president of Creative Strategies Inc. in San Jose, Calif. "... If [Compaq] didn't become
aggressive in dealing with the direct model and embracing it, they were on the way. I think [Compaq
CEO] Ben [Rosen] and the board understand this."
Keeping up with Dell
Bajarin and others agree that Compaq must re-jigger its reseller relationships, in order to compete more
effectively with Dell Computer Corp. (Nasdaq:DELL - news), its fastest-growing rival.
For now, Compaq's possible directions have competitors scrambling to position themselves, and
customers scratching their heads.
But all agree that Compaq remains formidable -- both as a competitor and a provider of PC products.
"They have a lot of the pieces, but hasn't been articulated in a particularly cohesive or effective matter,"
said Bruce Stephen, an analyst at International Data Corp., in Framingham, Mass.
Net epiphany needed
Analysts noted that Compaq, unlike Microsoft and other rivals, has not had its Internet epiphany. They
say it needs to better articulate its Internet strategy, and that with AltaVista and Zip2 in its stable,
Compaq has some real strengths to play.
"They need to get some kind of synergy going," said Andrew M. Seybold, editor of the Outlook on
Communications and Computing newsletter.
Seybold noted that with Digital, Tandem and other networking companies it already owns, Compaq has
a great deal of potential as a networking company.
"PCs are becoming commodities, but they own core pieces of key technologies, and AltaVista."
Don't cry for Pfeiffer
Leading the way in these new forays will be Compaq's co-founder and chairman, Ben Rosen.
Rosen, who has previously kept a low profile, is widely regarded as a sharp observer of market trends.
So while the rest of the industry is waiting to see who might replace Pfeiffer, Compaq may well move
aggressively.
Oh, and don't feel too badly for Pfeiffer. His severance package includes a one-time payout worth four
times his base salary, for a total of $5.9 million. It also ups his total options by 3.97 million shares,
worth almost $90 million.
For that kind of money, Pfeiffer can buy himself a few roosters.
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