FORE will be FINE... NYT article on CPQ... with a mention of SUNW...
>>>April 19, 1999
Compaq Computer Ousts Chief Executive
By STEVE LOHR
he Compaq Computer Corp., the world's largest personal computer maker, ousted its president and chief executive, Eckhard Pfeiffer, Sunday in a dramatic boardroom coup that reflects just how much the Internet is shaking up the computer industry.
Reuters
Eckhard Pfeiffer, who was ousted from his position as president and chief executive of Compaq on Sunday, spoke at a corporate event in Houston last week.
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The forced resignation of the 57-year-old Pfeiffer, a leading figure in the personal computer industry, came as a surprise, especially the timing of the move. Compaq had just hosted hundreds of its leading corporate customers at a conference, where Pfeiffer confidently detailed the company's plans for the future. On Thursday, Compaq will hold its yearly shareholders meeting on its corporate campus in Houston, where the featured speaker was to have been Pfeiffer.
But with increasing urgency in recent days -- as Compaq warned that its first-quarter profits would be half of Wall Street's expectations and the company's stock price kept falling -- the longtime Compaq chairman, Benjamin M. Rosen, led the call for Pfeiffer's resignation.
After consulting with the other Compaq directors, Rosen met with Pfeiffer over the weekend and told him the board agreed that he should resign, according to a person close to the board. "It wasn't a request on Ben's part," the person said.
Rosen said Sunday that Compaq's problems were not fundamental strategic errors, but mainly that "we're not executing as well as we should have."
Asked about specific areas for improvement, Rosen replied, "The Internet opportunity for Compaq is incredible." He noted that Compaq, especially after its $8.7 billion purchase of the Digital Equipment Corp. last year, had everything from its own Internet search engine, Alta Vista, to large server computers for hosting Internet services and electronic commerce.
"We have it all, but some of our competitors have done a better job of positioning themselves and exploiting that opportunity," Rosen said.
IBM and Sun Microsystems have succeeded in casting themselves as suppliers of Internet hardware and services, for example, while Dell Computer has positioned itself as the personal computer maker whose direct sales model lends itself most naturally to marketing on the Internet.
In a brief statement announcing Pfeiffer's resignation, Rosen suggested that the accelerating change brought about by the Internet had overtaken Compaq's management, led by Pfeiffer. "As a company engaged in transforming its industry for the Internet era," Rosen said, "we must have the organizational flexibility necessary to move at Internet speed."
Earl Mason, Compaq's chief financial officer, also submitted his resignation Sunday. He had previously been offered the job of chief executive of a company outside the personal computer industry, an offer Mason informed the Compaq board he planned to accept.
His departure, Compaq said, was not related to Pfeiffer's resignation. "It was just an unfortunate coincidence of timing," Rosen explained.
Pfeiffer could not be reached for comment. But in a brief statement, he said, "Compaq has come a long way since I joined the company in 1983," adding that "under Ben's guidance, I know this company will realize its potential."
A search will begin immediately, Rosen said, for Pfeiffer's replacement. But in the meantime, Compaq will be headed by Rosen and two other directors, who will form a three-person office of the chief executive. The two are Frank P. Doyle, 67, a retired executive vice president of the General Electric Co.; and Robert Ted Enloe III, 60, a private investor. All three men will move to Houston to oversee the company, until a successor to Pfieffer is in place.
This is the second time Rosen, 65, has engineered the ouster of a Compaq chief executive. In 1991, he saw off Joseph R. Canion, an engineer who had helped design Compaq's first machine, sketching on a restaurant place mat. Canion had led the rise of Compaq, founded in 1983 and backed by Rosen's venture capital fund, Sevin Rosen. It thrived in the early years mainly by offering customers more powerful computers than its main rival, IBM, for about the same price.
But Compaq proved ill-suited for responding to the severe price-cutting that developed in the early 1990s. So Rosen led the boardroom revolt that pushed Canion out in October 1991. In his place, the board installed Pfeiffer, a German native who rose through the company's international operations and was a fierce advocate of low-cost, efficient production.
"In 1991, we were just a PC company," Rosen said. "Now we're a broad information technology company."
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Moving quickly to replace a chief executive is made easier at Compaq by the board structure that Rosen insisted on when the company was founded. The chairman and chief executive roles are split, with Rosen serving as a chairman who is not part of the management staff. In addition, the board is nearly all outside directors. Pfeiffer was the only member of Compaq's day-to-day management team on the board. The remaining 11 are Rosen and 10 outside directors.
"It's Ben's board, and the man really behind Compaq has always been Ben Rosen," Richard Shaffer, a principal at the research firm Technologic Partners, said. "With this move, it certainly seems that Ben Rosen is rethinking the Compaq business model once again."
Compaq profits have been squeezed recently by a combination of forces, including an eroding share of the fast-growing and lucrative business of PC servers, the large computers that serve as hubs of corporate networks and World Wide Web sites, analysts say. Other near-term problems, they say, are accelerated price-cutting on desktop PC's and the difficulty integrating Digital Equipment into Compaq.
Ten days ago, Compaq warned that its profits for the first quarter would be about $250 million instead of the Wall Street consensus estimate of $540 million.
Compaq's stock price closed on Friday at $23.625, representing a 44 percent decline so far this year.
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