PR firm loses Compaq, wins Hewlett-Packard
By Joe Wilcox
Staff Writer, CNET News.com
October 15, 1999, 6:30 a.m. PT
Compaq Computer is parting ways with its long-standing public relations
firm, Shandwick International, as the agency moves on to rival
Hewlett-Packard.
"Like a lot of relationships, it just kind of collapsed," said a source close to
the final negotiations. "There's no bitterness there or anything, just a
resignation that it's over."
In a letter to Compaq CEO Michael Capellas, dated October 7, Shandwick
CEO Scott Meyer explained that the two companies were moving in different
directions but could likely remain friends.
"We could sense that we were losing the spirit of partnership -- along with
management support -- that is vital to making a client-agency relationship
succeed. Rather than fracture the relationship further, we believe it is better
that we both simply move on," the letter stated.
This is just part of the turmoil for Compaq, which replaced its CEO earlier
this year in a management shake-up and has undergone major restructuring
as it attempts to expand beyond its core PC business into new areas.
Recently Compaq and Shandwick found working together more difficult as
Compaq grappled with its internal changes.
"Compaq isn't just a PC company
anymore," said Compaq spokesperson
Alan Hodel. "There's a new Compaq,
and as they say, 'we're under new
management,' so it was an appropriate
time to make a change."
Computer companies use public
relations agencies to spin their
messages and get information about
their products and services to news
organizations. Before switching to HP,
Compaq had been Shandwick's largest
account.
Compaq had been pulling back business
from Shandwick for months as the PC
manufacturer reevaluated its need for high-tech PR and hired more staff
internally.
"We have been examining this situation and our requirements in this area for
some time, and we agreed it was a time for a change," said Hodel. "They
are ending our 17-year relationship."
Sources close to Compaq said the decision to rely less on Shandwick was in
part a financial one. PR agencies bill by the hour and can be more costly to
maintain than in-house employees. Compaq, which is in the midst of a
massive cost-cutting program under the tenure of CEO Michael Capellas,
looked within the company for PR.
"Miller/Shandwick saw the writing on the wall," said one former employee,
who asked not to be identified. "I wouldn't say they went looking for new
business, but the HP opportunity was just too good to pass up."
The HP account came up for review unexpectedly in August when the
company decided to shop around its business PC account. Alexander Ogilvy
and Copithorne & Bellows split most of HP's system business, with BSMG
Worldwide handling Pavilion PCs and Cunningham Communications
handling high-end servers.
HP decided to bring the bulk of the PC business--including commercial
desktops, notebooks, workstations, and PCs servers--under one roof. While
Alexander Ogilvy and Copithorne & Bellows were early favorites, Shandwick
appeared late as a dark horse in the race for HP's PC business.
Neither HP or Shandwick were available for comment, but the PR agency
clearly wooed the PC manufacturer during presentations made in
mid-September, said sources close to both companies.
Alexander Ogilvy had all but eliminated itself from the running for fear of
jeopardizing its relationship with IBM, which it represents in Europe.
"You have to understand that Alexander only represented HP's NetServer
and small business accounts," said a source close to the PR agency. "The
expanded HP business would have been worldwide and that could have
caused trouble with IBM."
HP chose Shandwick almost immediately and spent the following weeks
finalizing a contract. The two companies signed the papers late last week.
"Shandwick is leaving a lot of money on the table by walking away from
Compaq," said one source close to both companies. Shandwick's
account with Compaq, which is much bigger than the deal with HP,
is valued at about $12 million a year. The HP deal is about half
that, said a source close to the company.
Officially, Compaq has not set a date for formerly severing its
relationship with Shandwick, but "plans a period of transition," said
Hodel. But sources close to HP said the company wants Shandwick
in place by mid-November.
Alexander Ogilvy, which has worked on HP's account for about five
years, and Copithorne & Bellows, on board for about 10 years, will
wrap up ongoing HP business through the Comdex computer trade
show, which is taking place in Las Vegas in mid-November. Their
last day is November 30.
Compaq, meanwhile, continues to hire internal PR staff and
evaluate options. "Don't expect Compaq to hire another agency
soon," said a source close to the company. "Compaq is more
interested in working from within to craft a message consistent with
the new direction of the company."
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