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

To: Windseye who wrote (59499)	4/22/1999 8:10:00 PM
From: rudedog	Read Replies (4) \| Respond to of 97611

After the shareholders' meeting I went across the street to a lunch place where a lot of CPQ people go. Had the good fortune to see some familiar faces and had lunch with them. They said that the "three musketeers" have been having a lot of conversations with mid-level managers about how the decision making process has been working over the last few years. The opinion at my table was that the change in philosophy at CPQ changed in summer of 1996, at the time that Earl Mason came on board. This was also when Gary Stimac, the last of the original founders (except for Rosen of course) left the company. Several thought that Stimac had been consulted by the BOD in the final hours, and that he was the "disgruntled executive" that EP referred to in his interview. It is no secret that Stimac had little respect for EP and battled him fiercely before leaving. Stimac had always been close to Rosen and also left at the peak of his career at CPQ - in 1995 Stimac's division provided 60% of CPQ's profits on 30% of the revenue and 7% of the units. There was also a major reorganization at that time. These people said that whereas "Classic Compaq" had fostered relatively low level decisions on products based on a combination of market analysis and a "gut feel" for what would be hot, which sometimes caused strikeouts but also allowed a number of home runs, Earl instituted a policy which tied every manager's decisions to EVA (Economic Value Add) and ROIC. The claim was that this would tie managers into the whole product cycle and produce better decisions, but what actually happened was that the decision making process got taken out of the hands of the engineering and marketing people and given to accountants. In addition, there was much less freedom to actually do things. Director level people who had formerly been able to sign off on expenses of $50,000 or less were suddenly reduced to $2500 - not even enough to order a server without VP approval. This virtually killed off the "skunk works" efforts which had done much of the development in the old CPQ. In addition, product ideas had to go through a much more formal process of analysis and justification. These people felt like the time to market was extended, in many cases extended to a point where the market window for a product disappeared. They said that sometimes the only way to get a project approved was to wait for the competition to bring it out first. The arrival of the Digital people created an even worse situation. Digital had a deeper management stack, with two more layers of management than Classic Compaq. The "digits" also were adept at justifying a host of existing programs, the value of which many of which the CPQ people questioned. One of my lunch partners is a program manager with a hot product which his team developed and brought to market with a single marketing person and 5 engineers. In order to do two related follow-on products, he needed an additional marketing resource and 5 more engineers, but couldn't get them because the 100% increase in his staffing violated the maximum guideline of 20%. Meanwhile, a team of DEC people across the hall has 400 people and no current product but they could not free up any resources to help. These stories may be anecdotal but they disclose a lack of focus on the attitudes that made CPQ great in the first place. Maybe these are the kind of things Rosen is talking about. This team was very upbeat by the way, they felt like Mason had imposed a "big company" mentality on CPQ without any feel for the culture, and had basically punished anyone who challenged his positions. There was no sympathy for EM. EP got better treatment, especially for the time before Mason arrived, but they all felt it was time for EP to move on. Ben Wells is known and liked in the organization and everyone has confidence in Rosen.