Thursday February 1, 2001
Compaq CEO Sees A Wireless,
Storage Hungry World
by Laura Rohde
London--With the U.S. economy going soft and the pc
market going flat, these are interesting times for the IT industry,
Compaq Chairman and Chief Executive Officer Michael Capellas
told a group of journalists at a breakfast meeting here on Thursday.
But Capellas thinks his company has positioned itself strongly for a
conservative expansion and is ready to take on upcoming
technological challenges such as wireless and storage demands as
well as big industry players such as IBM.
Pointing to Compaq's recently released fourth-quarter earnings
report, Capellas said that traditional PC sales now make up less
than half of the company's revenue, while strong performances by
Compaq's server and storage businesses have helped offset the
industrywide slowdown in consumer PC sales.
"I think we are taking a realistically conservative approach,"
Capellas said.
Specifically, the key areas for Compaq are wireless, software,
Internet content, storage, services, and strong strategic partnerships,
Capellas said.
"We really have spent some time thinking about where the market is
going. And over the last six months, we've really seen dramatic
progress in our ability to go high end. I think we're getting broader
market acceptance," Capellas said.
Looking five years out, Capellas sees a 70 percent/30 percent split
in the company's revenue stream, with the majority of Compaq's
revenue coming from "other solutions and portfolios [apart from
PCs]. We will continue to grow our services and servers at a very
fast rate," Capellas said.
Compaq will also focus on the wireless Internet, which Capellas
thinks will experience "absolutely explosive" growth. The company
also will look toward the next wave of applications designed for new
wireless devices that access the Internet.
"We have to change the applications because we no longer know
what the form factors will be. Access will have to be built into every
device. We are very interested in application integration," Capellas
said.
As a result, the company that made its name with PC sales will
spend more time developing software.
"We sell software inside of our products, though we sell it as a
solution so the software is not as evident; our software is a little
more bundled. But I do think we have to add software content over
time," Capellas said.
System management software is the direction the company plans to
go in, with middleware being embedded in database products by
vendors such as Oracle and manageability being built on top of it,
Capellas said.
Compaq is also making room for Linux, which will run on some of its
upcoming server products, but Capellas is certain that the
open-source Linux technology will not receive the investment
necessary to make it a powerful presence in the corporate market.
Therefore, Compaq is putting its main muscle behind Microsoft's
Windows 2000.
"We do think the Windows 2000 adoption rate will pick up. We see
Linux being positive around the edge, but it will not cannibalize
Windows at all," Capellas said.
As for another high-profile technology, Capellas was enthusiastic
about the Bluetooth wireless technology, though realistic regarding
its limitations. Bluetooth "is an effective technology, it is cost
effective, and it works. There is a market for it and there will also be
a market for wireless LANs in the home. But Bluetooth is not an
end-all technology," Capellas said.
Compaq will support wireless LANs in the future and it will support
Bluetooth, but the company will also "accept that wireless will roll out
at different speeds with different standards," Capellas said. For
example, Capellas predicted that GSM (Global System for Mobile
Communications) wireless telecommunications networks will
dominate in Europe and CDMA (Code Division Multiple Access)
technology will dominate in the United States, and Compaq will have
to offer full support for both.
In terms of the PC market, Compaq appears content to leave the
consumer market to rival Dell Computer while it sets its sights on
IBM.
"Dell is being very aggressive on [PC] pricing. We are not chasing
traditional PC prices all the way down. Another thing we are saying
is it's not just about price, it's about wrapping services around it. Just
a box for price is not a long-term solution," Capellas said.
Rather, Capellas sees "huge parallels" between IBM and Compaq.
"Overall, we are in the same space. I think growth numbers are
about the same. The philosophical difference is that IBM's strategy
is to start at the top and drill down," he said, whereas Compaq starts
from more of a middle position, looking at the device and building
the services and software around it.
"We get to the same point, but command it from different ends. Our
ability to innovate is our core competency," Capellas said.
Compaq has put a large investment behind the ASP (application
service provider) model, although Capellas stressed that the
company was not intending to become an ASP.
"We are never going to be an ASP. We will create technologies for
ASPs," he said.
Overall, Compaq realizes that it can't rely on its U.S. sales because
of the economic slowdown. But Capellas thinks that will be
temporary as the administration of President George W. Bush takes
over and can begin to make decisive moves to revitalize the
economy. A tax cut could be part of that, he said.
"We are hoping for a very unequivocal and decisive move on
taxation. It's got to be a big enough tax cut to be detected at
mid-market so as to change consumer confidence," Capellas said.
He also welcomed Wednesday's half-point cut in interest rates by
the U.S. Federal Reserve.
Laura Rohde is a London correspondent for the IDG News Service,
an InfoWorld affiliate. |
