Compaq CEO And CFO Resign Amid Turmoil
By Eric Auchard 21:48 04-18-99
NEW YORK (Reuters) - The top two executives of Compaq Computer Corp., the world's No. 1 personal computer maker, stunned the industry Sunday by quitting in the wake of the company's financial turmoil.
The Houston-based company said Eckhard Pfeiffer, Compaq's president and chief executive, and Earl Mason, the company's chief financial officer, resigned around mid-day Sunday.
In a statement, Compaq's board of directors said they had formed a three-man executive committee, led by Chairman Benjamin Rosen, to immediately take over operations of the company while a new chief executive was found.
The rapid-fire succession, just nine days after Compaq warned its first-quarter results would fall far short of Wall Street expectations, suggested the former executives were pushed out by the board.
''The computer world is in a lot of turmoil,'' Rosen told Reuters in a phone interview Sunday. ''The issues are very complex and we felt we really needed a change in the leadership in order to keep our position as the industry leader.''
On April 9, Compaq said revenues were likely to fall $500 million -- 5 percent -- short of Wall Street's expectations for the first-quarter, while earnings were due to drop a shocking 50 percent below expectations.
The news led Compaq's already sagging stock to tumble further and triggered a new round of shareholder lawsuits charging it had concealed the shortfall.
Compaq has been struggling to absorb last year's $8.4 billion acquisition of Digital Equipment Corp., a supplier of large business computers and computer services, and $2 billion purchase of Tandem Computer, a supplier of business computers.
The company said Rosen will become acting chief executive, pending the selection of a new chief executive to replace Pfeiffer.
Rosen, Compaq's co-founder and original financial backer in 1982, will be joined by Frank Doyle and Robert ''Ted'' Enloe, both vice chairmen and directors of Compaq, in a newly formed office of the chief executive.
Ben Wells, Compaq's current treasurer, was named acting chief financial officer, the company said.
''We have re-energized this company before, and working together, we will do it again,'' Rosen said. ''We will prove to every customer that this is the best company to serve their information technology needs,'' he said.
Pfeiffer's departure was a replay of 1991, when Rosen and the Compaq board elbowed out Rod Canion, the company's co-founder with Rosen and its original chief executive, and installed Pfeiffer to lead a turnaround as president and CEO.
Under Pfeiffer's stewardship, Compaq increased its share of the worldwide PC market from 3.5 percent to nearly 15 percent and along the way supplanted International Business Machines Corp. as the world's biggest PC manufacturer.
He had pledged Compaq would become one of the world's top three computer makers by 2000 -- a promise he achieved ahead of schedule with the recent Digital Equipment and Tandem mergers.
The acquisitions allowed Compaq to diversify beyond its roots as a PC maker into more profitable businesses supplying high-volume business computers, data storage systems and the consulting services necessary to run such complex equipment.
But in the end, analysts said they believed Pfeiffer may have tried to juggle too many balls at once.
Dan Niles, an analyst with brokerage firm BancBoston Robertson Stephens, said Compaq management's credibility problems arose because the company has under-performed its computer industry peers in four of the last five quarters.
''As an analyst you always like to feel that you are getting accurate information from a company,'' Niles said. ''And given (Compaq's) results lately, it has been somewhat difficult to believe them,'' he said.
''When you run a company you have to take accountability for what happens,'' Niles added. ''At the same time, you have to give (Pfeiffer) a lot of credit,'' he said of his CEO tenure.
Compaq had stumbled in the face of intense competition, especially by Dell Computer Corp., which has cherry-picked some of Compaq's most profitable businesses by selling PCs directly to customers via the phone and Web.
While the departing Pfeiffer had often cited industry pressures for Compaq's troubles, Rosen said much of the blame lay in failed execution of the company's own plans.
''In fairness, a lot of it was our fault,'' Rosen said of the disappointing first-quarter results.
''I don't think we executed well,'' he said of the company's business game-plan for the first-quarter. ''In some way we have been too slow... we want to try and get a head of the curve,'' he said of plans to expand into growing markets.
Doyle is a veteran former marketing executive at General Electric Co. and was a member of GE's office of the chief executive from 1992 to 1996. Doyle served on Digital's board since 1995 and joined Compaq's board after the merger.
Both he and Enloe, a financial services executive and long-time Compaq board member, plan to be actively involved in running Compaq from its Houston headquarters, they said.
Mason said he resigned to take the top executive position at an as-yet-undisclosed company outside the computer industry.
He said in interview from his home in Houston that his job search had begun before he became aware that Compaq first-quarter results would fall short.
''You don't get a CEO job overnight,'' he said in response to a reporter's question about the timing of his departure. He declined to comment further until his new job is announced.
|
