Another and better Capellas interview - in which he explains why no CFO (among other things):
chron.com
HoustonChronicle.com
Jan. 24, 2000, 8:56PM
Q&A
Q&A
Michael Capellas talked about his last six months as Compaq Corp.'s CEO recently from his home in Katy with Dwight Silverman, the Chronicle's technology reporter.
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Q. What's the status of the search for a new chief financial officer?
A. The obvious question is, "OK, so what's taking so long?" We have set very, very high standards for who that person is going to be. We have had a number of interesting candidates, we have had a number of good candidates, but we want a great candidate. I will tell you it is a very, very difficult market for the CFO now.
You've had a huge run-up on just the market in general. The CFOs traditionally, of the kinds of companies and of the kind of stature we are looking for, are in a deep (stock) option position. And so, with some of the numbers going up, there are a lot of people with very large equity stakes.
The second (factor), and probably the most important one, is the huge pool of talent that's gone to the Internet start-ups. There are an unbelievable number of start-ups coming on.
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Q. The morning after you were named CEO, at the managers meeting, you talked about "cool products." You talked about them almost as though Compaq wasn't doing cool products. Do you think they weren't, and are they doing them now?
A. I don't believe we had unleashed innovation. My daughter has a poster in her room of a Dalmatian, and it has pink and blue spots on it and it says "Dare to be different" underneath it. I don't think we had created an atmosphere where we dared to be different -- that being innovative was really a priority. I believe the fundamental nature of Compaq was to be innovative and somewhere along the way we had lost the edge on that. It is a different environment when you actually say,"I believe being innovative is one of the most important things we do." That changes the mindset of people.
I don't believe we were being innovative in our designs. I don't believe we were being forward in our designs. And I believe we have changed things to really get people to show some of their creativity.
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Q. What do you think caused Compaq to not be innovative?
A. Let's take the external factors first. Let's face it. The market moved to the middle of acceptance. You have to give Mr. Jobs credit for the iMac and reintroducing style. ...
The second thing is, for whatever reason, I do believe we became very conservative, through some period of great success and at some point Compaq became a little complacent. And as things started to get tough, I think we got a little conservative.
I am not going to psychoanalyze why that all happened, but we became conservative and set in our ways.
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Q. Do you have contact with previous chief executives Eckhard Pfeiffer or Rod Canion?
A. Yeah, I have seen Rod a couple of times. Great guy. I have only had very, very limited contact with Eckhard. We have exchanged a couple of very, very friendly e-mails. But there has not been a whole lot of contact between us.
I will say I will look him up. I continue to respect him. He hired me, after all.
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Q. When you need advice, who do you turn to?
A. If you are saying do you have one particular confidante who really stands out -- Ben (Rosen). If I am really troubled about something I don't feel that I can really talk to anybody else about, I talk to Ben.
It is almost always generated by me. "This one bothers me." Might be a Sunday night. He is a very, very good sounding board.
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Q. What about the announced layoffs? How are those coming?
A. I am very pleased with the progress we are making. We set out with a very clear plan. Targets were set down, people understood them and they are managing to them. We are on target.
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Q. What's been the biggest frustration of the job so far?
A. The largest frustration has been, and it is the nature of the job, is the number of stakeholders you have to serve. You have stakeholders which are certainly employees, customers of course, stakeholders with financial considerations, shareholders. And you have to service each one. So part of the frustration is that you have to maintain some balance.
There is the old statement that you have to be a mile wide and an inch deep, because you can't be a mile wide and a mile deep at the same time.
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Q. What's been the biggest surprise?
A. The most surprising thing to me has been how few surprises there are. In fact, that actually shocks me. I never felt that I was naive about things. I expected there to be more shocks, more surprises than there have been.
The biggest surprise to me is there has not been anything that came to me where I said, "Oh my God, I had no earthly idea."
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Q. Do still feel that buying Digital (Equipment Corp.) was a good idea?
A. The strategy of buying Digital was absolutely the right thing. The Internet has moved to where high-performance computing matters. We got the service capabilities, which is still a differentiator in the market. We got with it the capabilities to really extend the direct sales force. We have a sales force who understands how to sell into the complex sale. We draw on a great heritage of understanding network computing -- remember Digital was the original distributing computing company.
If you look at the capitalization value of CMGI, plus what will also be the value creation that comes out of our 15 percent stake in AltaVista, plus the other assets that they have, from a financial point of view, the valuation of Digital will be paid in total by simply the creation of the Internet properties surrounding AltaVista.
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Q. Compaq's stock has languished in the 20s for months. What do you say to the guy who bought in at $50 a year and a half ago?
A. As is always the case, what I can't say is why it did what it did. What I can say is what we are going to do to improve the valuation.
What I tell somebody like that is, here are the things that we believe needs to happen to make the stock very attractive. We understand there was some credibility that needed to be rebuilt ... with the analysts, with Wall Street, with employees, with customers. We will start off by saying we will create that credibility with an open and honest culture. We believe we have done that.
The second thing we say is that we also understand that credibility will come through performance. Performance comes from being predictable, so we are doing the things that make us predictable.
The third thing will come from getting your costs and infrastructure under control and we will do that.
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Q. Since last spring, Compaq has lost a lot of talented people. You've had a kind of brain drain. Has that been stemmed?
A. We are a living in an unparalleled time of people moving into (Internet companies). You have to accept that there are going to be a lot of talented people going off to Internet start-up companies.
And, by the way, I think that any company right now that is not losing a bunch of talented people to the Internet start-up space, has a bigger problem than the ones who are.
We are a strong technology company that grows entrepreneurial people that know how to make things happen. So, I accept to some degree the fact that we are losing people is a positive sign.
What you have to do is say, "I accept this for what it is, now I have to do more development, have to take more chances with younger people, I have to really understand the recruiting and development of people."
But that explains only the reality of the market. We had a problem that was bigger than the market.
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Q. The business PC division, which is Compaq's core business, is your most troubled division. What are you doing to turn that around?
A. This is not a declaration that there is not a whole lot of work to do yet, but I absolutely believe it's on a rebound. I look for attitude, I look for clarity of direction, and I look for signs that execution is improving.
(Senior Vice President) Mike Winkler has gone in and made some very, very significant changes to his management team. He accepted that it was time to do some things differently.
We built that management through bringing in some people from the outside We have said business as usual is not good enough. We have a new management team, which is really energized. And then, we have allowed the organization to look at the things they needed to do.
I see the group being re-energized. I really feel the difference in the positive attitude. I see them making the moves they need to make.
This is opposed to saying, "Gee, I'm looking over my shoulder." I am starting to see more of the atmosphere: "We are the world's leader, we have the best brand, let's not forget that we have a commanding worldwide market share lead." It's time we come up spitting blood.
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Q. Apple revived itself because of the success of one product. Is the iPaq the iMac for the PC group? Is this its K-car?
A. One of the reasons why we command the largest market share in the world for personal computers is that we service almost the entire market.
If you look at the market Apple served, it was a much tighter market. One product could shift the market. You are seeing us narrowing our product lines, fewer products, a much clearer focus, simplified products and design. But we will continue to service a very broad market.
The problem with being No. 1 is that the silver bullet is a little harder to find. The iPaq will take a market space, it will be a commanding product, it will be a great product. But it is not going to be one home run. We will hit four or five singles and score some runs.
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Q. Compaq has tried various things to get into the direct business, all of them kind of hybrid systems using both direct and indirect. Why didn't previous shots at direct work?
A. If you look at the historical success of Compaq, it is a phenomenal success story. It is always very difficult to change something that has been phenomenally successful. It is very difficult.
You are forcing yourself to change something that worked so well, and that's a difficult thing. So, we were never fully committed. We only had one foot in the direct camp.
The other reason is, we have great skills. We do a lot of things unbelievably well. For example, as a volume manufacturer, we are without parallel. But these were some new skills, but I think we sometimes underestimated the sort of skills it took to understand the end-to-end process. We were learning something new.
It was part of the commitment to a model that had been so successful.
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