To Thread: Some interesting observations on Compaq....
Posted by MARLEY11 on Thu 06 May '99 (08:22 AM)
One of the interesting and unexpected
skills you develop after 20 years as a
business reporter is an uncanny knack for
spotting when a company is about to
implode.
This is not a widely applicable skill.
For example, it doesn't help predict
winners (if it did, I'd be a venture
capitalist). It doesn't even help in
predicting when a good company may have
an impending change of fortune. It is, in
fact, only good for one thing: detecting
when a giant, celebrated company is
losing its touch and heading for a
crisis.
That alone might seem useful-but in
fact, it really is not. You can try to
write about this sensation, but editors
usually don't believe you. And when they
do, you're wrong just often enough to
look like a damn fool. I suppose I could
use this special knowledge to short the
company's stock-but I'm averse to
spending the rest of my life making
license plates.
Still, when the sensation does strike,
it is always a stunning and unexpected
experience. Ask any veteran financial
reporter and he or she will tell you the
same thing. You walk into a famous
company, fully expecting to write yet the
latest glowing corporate profile, but
something is just not right. It can be as
prosaic as the lack of new patents on
the wall of the lobby, or the arrogant
manner of the receptionist. A little
siren goes off in your brain. Something's
wrong. Suddenly, now that you're
looking, you start noticing other
things-a new product that arrived three
months late and without some expected
features, the departure of some key
technologists and managers, an unseemly
focus on building a new corporate
headquarters. It's as if, suddenly
enlightened, you are seeing the company
for the first time.
That happened to me at Apple at the end
of the Sculley era; at Hewlett-Packard
right before the founders returned to
save the firm; and at Silicon Graphics
just before the company went into a
nosedive. But the most recent time that
siren went off in my brain came during a
visit last August to Houston. And that
explains why I wasn't surprised earlier
this week when mighty Compaq, the world's
largest computer company, fired CEO
Eckhard Pfeiffer following a collapse of
the company's quarterly earnings.
Of course, the media stories about
Compaq's troubles listed a whole range of
reasons for Pfeiffer's firing, from
declining sales of PCs to trouble
converting manufacturing to a
built-to-order system. All true, no
doubt, but those are only symptoms. The
real problem always lies much deeper: The
company has lost its way. Sometime in
the last five years Compaq stopped being
a computer company and instead became an
institution obsessed with power and
position. In retrospect, you can see it
in the company's products: once exciting
and innovative, now staid and careful.
It's the oldest story in high tech. And
that's what I saw that day, to my
surprise, in Houston. High tech companies
are about energy and chaos. Compaq, by
comparison, was about authority and
control. When I first saw the corporate
headquarters, with its guarded gates and
glass boxes linked by aerial pedestrian
tunnels, the word that came to mind was
“Gattaca.” You know, the austere, perfect
and emotionally dead techno-future world
of the recent movie. Walking through
those tubes, looking at all the
well-dressed, well-scrubbed people
passing quietly by, I was supposed to be
impressed by the sheer efficiency of the
operation. Instead, alarms were ringing
in my head. The badging procedure was so
formal that I was ready to give the
requisite drop of blood for my DNA check.
More alarms. Then the capper: The vice
president whom I had flown 1,500 miles
too see and spent a day and night to
reach, didn't show up for the meeting. He
hadn't even deigned to warn me off in
advance. Instead, I was left to talk to a
distracted assistant. Have a nice day.
Now the alarms were clanging so loud I
could hardly hear myself think. I can
live with personal insults, but when you
blow off a meeting without warning with
the editor of a national magazine who's
traveled half a continent to see you, you
may have been spending a little too much
time on corporate politics and not
enough on the real work of the company.
And that seems to have been symptomatic
of Compaq, from Pfeiffer (especially
Pfeiffer) on down. When a company devotes
more time to power than products, its
moral compass starts to spin. An
arrogance, with an attendant indifferent
cruelty, begins to creep in. You stop
listening to your suppliers, your
distribution channel, your customers and
even the employees below you on the
organization chart. And when that
happens, you get very stupid, very fast.
That's the real story behind Compaq's
current mess. In his greed to build the
world's biggest computer company, Eckhard
Pfeiffer bought Digital Equipment Corp.,
the quintessential example of a high
tech company that lost its moorings.
Bolting DEC to Compaq was like adding
plague to influenza. Everybody in high
tech knew that DEC was a mere shell. If
Boston's Route 128 corridor was the land
of living corporate dead, then DEC was
King of the Zombies. Not surprisingly,
the snake choked on the rat.
Had Pfeiffer been thinking like a
businessman and not an empire builder, he
might have bought DEC's Alpha chip
technology, fired the employees (so they
could return to a useful life), bulldozed
DEC's buildings and returned the land to
productivity as a forest. But, of
course, that wouldn't have made Compaq
the Biggest Computer Company in the
World. As things now stand, Compaq soon
won't even be the biggest computer
company in Texas.
By coincidence, I flew up to Austin that
same day to visit Dell Computer. It was
enough to make an old newsie cry with
relief. Boxes piled up in the hallway,
wires hanging from the ceiling, a
half-mile hike in the hot sun from a
crowded parking lot, 300-pound guys with
Harley tattoos (“Ride Free or Die”)
taking customer service calls, employees
crashing into me as they ran in and out
of meetings and an exhausted executive
who apologized for giving me only ten
minutes in her “very crazy day.” No alarm
bells here.
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Perhaps this is now the bottom but CPQ needs to re-invent itself.
EKS |
