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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: MeDroogies who wrote (74750)	12/31/1999 7:17:00 PM
From: Walcalla	Read Replies (1) \| Respond to of 97611

Business Week: January 10, 2000 News: Analysis & Commentary: Turnarounds Compaq's Long Road Back What happens when you go from a career in corporate information systems to chief executive of a $38 billion computer company in just eight months? Ask Michael D. Capellas, who in July became the surprise replacement for ousted Compaq Computer CEO Eckhard Pfeiffer. ``You think something magical happens and everything is all different,' says Capellas. ``It wasn't.' Wall Street agrees: Things still aren't different enough to convince investors that the troubled computer giant is back. At 27, Compaq's stock is up 50% from its nadir of 18 in October, but it's still off some 50% from its 12-month high. Analysts worry that Capellas, Compaq's former chief information officer, isn't moving fast enough to trim costs, fix the company's woes in the critical business-computer market, and reposition it as an Internet wizard. Says Merrill Lynch & Co. analyst Steven M. Fortuna: ``I don't see enough going on there to support a buy recommendation.' So Capellas isn't taking a lot of time off to celebrate the new millennium. Instead, he's on a mission to reshape the company's strategy around the Net, devise a new distribution plan, and straighten out Compaq's unprofitable corporate-PC business. The 45-year-old Capellas has made progress in one key area: convincing workers and customers that the company is grappling with the problems that mushroomed over the past few years as companies such as Dell Computer, IBM, and Hewlett-Packard grabbed market share in desktop computers and PC servers. Capellas has been in nonstop meetings with employees and customers--trying to keep members of both constituencies from abandoning ship. He boiled the muddled corporate strategy down to six key objectives, printed up laminated cards, and handed them to all employees. Top priority: ``Everything to the Internet.' WEB STORAGE. Another morale booster: On Nov. 22, the Houston computer maker gave each employee 200 shares of Compaq stock. That's hardly because of holiday spirit. Compaq must become more competitive with dot.com start-ups that hand out options like candy. It's also the quickest way to convince employees they have a stake in any turnaround. Says Capellas: ``If [employees] don't believe it, the market won't believe it.' But Compaq still has a long way to go to catch up. Capellas is trying to position the company's Tandem mainframes as the ideal machines for processing huge volumes of online transactions. He also is recasting Compaq storage systems as the perfect way to store information on the Web. On the desktop, Capellas wants to ``redefine Internet access.' In November, the company unveiled its new iPaq line of corporate PCs, designed with easy one-button connections to the Net. To cut inventory costs, the iPaq is available in only a few models. What's more, the machines will only be available directly from Compaq. That's more like Dell, but not enough: Compaq resellers still get a commission for booking the order, eating into profits. To convince Wall Street he's turning around the company, Capellas may have to come up with something different, if not magical. By Ira Sager in Houston Copyright 2000 The McGraw-Hill Companies, Inc. All rights reserved. Any use is subject to (1) terms and conditions of this service and (2) rules stated under ``Read This First' in the ``About Business Week' area.