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

To: williet who wrote (17796)	2/20/1998 5:31:00 PM
From: John Koligman	Respond to of 97611

The second article concerns the value of tech CEO's, Pfeiffer and Dell are profiled. There is an interesting comment on how EP supposedly made Ted Waitt of Gateway cool his heels in the lobby of CPQ's headquarters, and that this affected the proposed merger <gggg> February 19, 1998 In High-Tech Companies, the CEO Is Key By JOHN C. DVORAK People use sports analogies far too often in business. But what is not generally appreciated is the impact of management and ownership on what happens on the field. Think of the great track records of top front-office people like Carmen Policy of the San Francisco 49ers, Jerry West of the Los Angeles Lakers and general manager John Schuerholz of the Atlanta Braves. These shrewd businessmen and first-rate talent scouts have made their teams competitive year after year. The same holds true for technology companies, where leadership -- even more than the quality of the product -- is often the critical factor in determining a company's success. Almost all of the best-performing high-tech companies -- like Microsoft, Intel and Cisco Systems -- are successful largely because of a superior chairman or CEO. The best CEOs have a clear vision of the company and where it's headed, and investors know well that without this key individual the company's fortunes can decline. We saw IBM go downhill after John Opel handed the reins over to John Akers, but its fortunes have perked up again with Lou Gerstner at the helm. Here are some thoughts on the CEOs of high-profile technology companies and on what might happen if they should leave for one reason or another: Microsoft. Bill Gates, who maintains the title of Chairman, has never been considered a great manager and during the years that Microsoft soared above the competition it was managed by ex-Tandy executive Jon Shirley, who may be as responsible as Gates is for the direction the company has taken. But Gates has the final word when it comes to direction and strategy. Yet, because Gates micromanages the company, in many ways it's hard to say whether Microsoft would be better off with or without him. The litany is that Gates is Microsoft: When you talk to him, he often uses "me" or "I" interchangeably with "Microsoft." This should be disconcerting to investors, and the stock undoubtedly would sell off big time if he ever stepped aside. That's very unlikely, of course: Since Gates is a young man by executive standards, we can expect him to stay at the top, and this issue will be academic for years to come. Compaq Computer. Right now Eckhard Pfeiffer appears to be the most dynamic and visionary CEO of all those who run PC makers. It's no wonder Compaq is number one in PC sales. This is an interesting situation, because a few years ago the company's founding CEO, Rod Canion, was ousted by the board of directors, who gave Pfeiffer the top job. Since then, Compaq and its stock have flourished. Still, it's distressingly difficult to assess Pfeiffer's value to Compaq. If, in fact, Pfeiffer is a great coach on a well-managed football team, he may be expendable. (Remember: coach George Seifert won a Super Bowl with a 49ers team built by Policy and Bill Walsh.) And Pfeiffer is known to have a difficult personality. For example, I'm told by insiders at Gateway 2000 that one of the reasons that a proposed acquisition of Gateway by Compaq fell through was because Ted Waitt and the Gateway executives were livid at rudely being kept waiting in the lobby by Pfeiffer, who couldn't see them at the scheduled time of the appointment. This is simply inexcusable when a multibillion-dollar deal is being negotiated. (I wasn't told the exact amount of time they waited but was led to believe it was "hours" -- plural.) Dell Computer. Michael Dell is one of the unsung great young executives in the world. He may not be a spectacular player, but he rarely if ever makes mistakes. In fact, he has made a few, such as the early foray into laptops with a machine that didn't work. But that was quickly corrected and the company continues to hum like a machine. Dell Computer is Michael Dell. It would be a huge loss and potentially a major downside risk if he ever retired. Luckily for shareholders he likes what he's doing and he's also only 32. Gateway 2000. One of Dell's principal rivals, Ted Waitt is the most puzzling of the CEOs running major computer companies. He is very down to earth, prefers the cow country in South Dakota to more cosmopolitan environs and wears his hair in a skinny ponytail as either a fashion statement or some symbol of revolt. Although some industry insiders consider both Waitt and Dell "in Intel's pocket," that hasn't hurt either company -- or them, for that matter: Both men have accumulated enormous wealth playing the game as dictated by Intel. It's very difficult to assess Waitt's importance to Gateway, although the company might do better without him (though there really is nobody in house to take his place). He loses key executives left and right and has numerous middle managers who should be put out to pasture. The company has mediocre public relations, but great marketing. Waitt himself is never recognized as one of the most important executives in the country and that speaks volumes about Gateway's lack of visibility. This company -- like its CEO -- remains an enigma. Iomega. This company became a solid winner when CEO Kim Edwards took over and promptly brought out an entirely new product line -- the Zip drive. When I talked to him after he first joined the company a few years ago, he said that finding a company like Iomega was a dream come true. Iomega was strong on technology and light on marketing. To a marketing wizard like Edwards, that was a formula for success. If, for some reason, Edwards leaves or retires there is no reason to believe that the company would not fall back into its old ways -- especially as it faces new competitive challenges and a flagging stock price. Edwards is critical to Iomega's ability to solve those problems -- and to its future success. Next month I'll have some thoughts about the CEOs of some other leading technology companies.