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`
`Compaq
`
`From Wikipedia, the free encyclopedia
`
`Compaq - Wikipedia, the free encyclopedia
`
`Compaq Computer Corporation was a company founded
`in 1982, that developed, sold, and supported computers and
`related products and services. Compaq produced some of
`the first IBM PC compatible computers, being the first
`company to legally reverse-engineer the IBM Personal
`Computer.[1][2] It rose to become the largest supplier of PC
`systems during the 1990s before being overtaken by Dell in
`2001.[3] Struggling in the aftermath of the dot-com bubble
`bust, Compaq was acquired for US$25 billion by HP in
`2002.[4][5] The Compaq brand remained used by HP for
`lower-end systems.[6]
`
`The company was formed by Rod Canion, Jim Harris and
`Bill Murto—former Texas Instruments senior managers.
`Murto (SVP of Sales) departed Compaq in 1987, while
`Canion (President and CEO) and Harris (SVP of
`Engineering) left under a shakeup in 1991, which saw
`Eckhard Pfeiffer appointed President and CEO. Pfeiffer
`served through the 1990s. Ben Rosen provided the venture
`capital financing for the fledgling company and served as
`chairman of the board for 18 years from 1983 until
`September 28, 2000, when he retired and was succeeded by
`Michael Capellas, who served as the last Chairman and CEO
`until its merger with HP.[7][8]
`
`Prior to its takeover the company was headquartered in a
`facility in northwest unincorporated Harris County, Texas,
`that now continues as HP's largest United States facility.
`
`Contents
`
`1 History
`1.1 Founding
`1.1.1 Introduction of Compaq Portable
`1.1.2 Compaq DeskPro
`1.1.3 Compaq DeskPro 386
`1.1.4 Compaq SystemPro
`1.2 The 1990s
`1.2.1 Ouster of co-founders
`1.2.2 Market ascension
`1.2.3 Management shuffle
`
`1.2.4 Acquisitions
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`Subsidiaries Tandem Computers, Digital
`Equipment Corporation
`
`Compaq Computer Corporation
`
`Industry
`
`Fate
`
`The 2007–present logo.
`Computer hardware, Computer
`software, Computer systems, IT
`consulting, IT services
`acquired by HP in 2002, brand
`remains in use for lower-end
`systems
`February 1982
`Founded
`Headquarters Harris County, Texas, United States
`Area served United States
`United Kingdom
`Rod Canion,
`Founder, former President and CEO
`Jim Harris,
`Founder, former SVP Engineering
`Bill Murto
`Founder, former SVP Sales
`Ben Rosen
`former Chairman, former interim
`CEO, original venture capital
`investor
`Eckhard Pfeiffer
`former President and CEO
`Michael Capellas
`last Chairman and CEO
`Desktops, Notebooks, Servers,
`Telecommunications equipment,
`Software
`
`Key people
`
`Products
`
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`1.2.4 Acquisitions
`1.2.5 Ouster of Pfeiffer
`1.3 Late 1990s–2000s
`1.3.1 Struggles
`1.4 Acquisition by Hewlett-Packard
`1.5 Post-merger
`2 Headquarters
`3 Competitors
`4 Sponsorship
`5 See also
`6 References
`7 External links
`
`History
`
`Founding
`
`Compaq was founded in February 1982 by Rod Canion, Jim Harris and
`Bill Murto, three senior managers from semiconductor manufacturer
`Texas Instruments. The three of them had left due to lack of faith and loss
`of confidence in TI's management, and initially considered but ultimately
`decided against starting a chain of Mexican restaurants.[9][10] Each
`invested $1,000 to form the company, which was founded with the temporary name Gateway Technology. The
`name "COMPAQ" was said to be derived from "Compatibility and Quality" but this explanation was an
`afterthought. The name was chosen from many suggested by Ogilvy and Mather; it being the name least rejected.
`The first Compaq PC was sketched out on a table napkin by Ted Papajohn while dining with the founders in a
`Houston pie shop.[9][11] Their first venture capital came from Benjamin M. Rosen and Sevin Rosen Funds who
`helped the fledgling company secure $1.5 million to produce their initial computer.[23] (http://ezinearticles_com/?
`Compaq-Computer---Joseph-R.-Rod-Canions-Success-Story&id=219879) Overall, the founders managed to
`raise $25 million from venture capitalists, as this gave stability to the new company as well as providing assurances
`to the dealers or middlemen.
`
`Early Compaq logo.
`
`Unlike many startups, Compaq differentiated its offerings from the many other IBM clones by not focusing mainly
`on price, but instead concentrating on new features, such as portability and better graphics displays as well as
`performance—and all at prices comparable to those of IBM’s PCs. In contrast to Dell Computer and Gateway
`2000, Compaq hired veteran engineers with an average of 15 years experience, which lent credibility to Compaq's
`reputation of reliability among customers.[12][13] Due to its partnership with Intel, Compaq was able to maintain a
`technological lead in the market place as it was the first one to come out with the next generation of each Intel
`processor.[9]
`
`Under Canion's direction, Compaq sold computers only through dealers to avoid potential competition that a direct
`sales channel would foster, which helped foster loyalty among resellers. By giving dealers considerable leeway in
`pricing Compaq's offerings, either a significant markup for more profits or discount for more sales, dealers had a
`major incentive to advertise Compaq.[12][13]
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`During its first year of sales (second year of operation), the company sold 53,000 PCs for sales of $111 million, the
`first start-up to hit the $100 million mark that fast. Compaq went public in 1983 on the NYSE and raised $67
`million. In 1986, it enjoyed record sales of $329 million from 150,000 PCs, and being the youngest-ever firm to
`make the Fortune 500. In 1987, Compaq hit the $1 billion revenue mark, taking the least amount of time to reach
`that milestone.[24] (http://ezinearticles_com/?Compaq-Computer---Joseph-R.-Rod-Canions-Success-
`Story&id=219879)[12][12] By 1991, Compaq held the fifth place spot in the PC market with $3 billion in sales that
`year.[14]
`
`Two key marketing executives in Compaq's early years, Jim D'Arezzo and Sparky Sparks, had come from IBM's
`PC Group. Other key executives responsible for the company's meteoric growth in the late 80s and early 90s were
`Ross A. Cooley, another former IBM associate, who served for many years as SVP of GM North America;
`Michael Swavely, who was the company's chief marketing officer in the early years, and eventually ran the North
`America organization, later passing along that responsibility to Cooley when Swavely retired. In the United States,
`Brendan A. "Mac" McLoughlin (another long time IBM executive) led the company's field sales organization after
`starting up the Western U.S. Area of Operations. These executives, along with other key contributors, including
`Kevin Ellington, Douglas Johns, Steven Flannigan, and Gary Stimac, helped the company with the IBM
`Corporation in all personal computer sales categories, after many predicted that none could compete with the
`behemoth.
`
`The soft-spoken Canion was popular with employees and the culture that he built helped Compaq to attract the
`best talent. Instead of headquartering the company in a downtown Houston skyscraper, Canion chose a West
`Coast-style campus surrounded by forests, where every employee had similar offices and no-one (not even the
`CEO) had a reserved parking spot. At semi-annual meetings, turnout was high as any employee could ask
`questions to senior managers.[9][12]
`
`In 1987, company co-founder Bill Murto resigned to study at a religious education program at the University of St.
`Thomas. Murto had helped to organize the company's marketing and authorized-dealer distribution strategy, and
`held the post of senior vice president of sales since June 1985. Murto was succeeded by Ross A. Cooley, director
`of corporate sales. Cooley would report to Michael S. Swavely, vice president for marketing, who has been given
`increased responsibility and the title of vice president for sales and marketing.[15]
`
`Introduction of Compaq Portable
`
`In November 1982 Compaq announced their first product, the Compaq
`Portable, a portable IBM PC compatible personal computer. It was
`released in March 1983 at $2995, considerably more affordable than the
`Canadian Hyperion. The Compaq Portable was one of the progenitors of
`today's laptop; some called it a "suitcase computer" for its size and the
`look of its case. It was the second IBM PC compatible, being capable of
`running all software that would run on an IBM PC. It was a commercial
`success, selling 53,000 units in its first year and generating $111 million in
`sales revenue. The Compaq Portable was the first in the range of the
`Compaq Portable series. Compaq was able to market a legal IBM clone
`because IBM mostly used "off the shelf" parts for their PC. Furthermore,
`Microsoft had kept the right to license the operating system to other
`
`Compaq Portable
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`computer manufacturers. The only part which had to be duplicated was the BIOS, which Compaq did legally by
`using clean room reverse engineering at a cost of $1 million.[16][17][18]
`
`By October 1983, when Compaq announced the Plus with a 10MB hard drive, PC Magazine wrote of "the
`reputation for compatibility it built with its highly regarded floppy disk portable".[19] Soon clone BIOses from
`Phoenix Technologies and other companies that also who reverse engineered IBM's design, then sold their version
`to the PC clone manufacturers, became available.
`
`Compaq DeskPro
`
`On June 28, 1984 Compaq released the Compaq Deskpro, a 16-bit desktop computer using an Intel 8086
`microprocessor running at 7.14 MHz. It was considerably faster than an IBM PC and was, like the Compaq
`Portable, also capable of running IBM software. It was Compaq's first non-portable computer and began the
`Compaq Deskpro line of computers.
`
`Compaq DeskPro 386
`
`When Compaq introduced the first PC based on Intel's new 80386 microprocessor, the Compaq Deskpro 386, in
`1986,[20] it marked the first CPU change to the PC platform that was not initiated by IBM. An IBM-made 386
`machine eventually reached the market seven months later, but by that time Compaq was the 386 supplier of choice
`and IBM had lost its image of technical leadership.
`
`For the first three months after announcement the Deskpro 386 shipped with Windows/386. This was a version of
`Windows 2.1 adapted for the 80386 processor. Support for the virtual 8086 mode was added by Compaq
`engineers.
`
`Compaq SystemPro
`
`Compaq's technical leadership and the rivalry with IBM was emphasized when the SystemPro server was launched
`in late 1989 – this was a true server product with standard support for a second CPU and RAID, but also the first
`product to feature the EISA bus, designed in reaction to IBM's MCA (MicroChannel Architecture) which was
`incompatible with the original AT bus.
`
`Although Compaq had made its fortune by being 100 percent IBM-compatible, it decided to continue with the
`original AT bus instead of licensing IBM's MCA. Compaq's executives calculated that the $80 billion already spent
`by corporations on IBM-compatible technology would make it difficult for even IBM to force manufacturers to
`adopt the new MCA design. This was the right call as IBM’s new MCA was praised but failed to supplant the AT
`Bus. Prior to developing EISA, Compaq invested significant resources into reverse engineering MCA. Compaq
`shelved the idea of cloning MCA and formed an alliance with Hewlett Packard and seven other major
`manufacturers, known collectively as the "Gang of Nine" to develop EISA.[13]
`
`The 1990s
`
`Ouster of co-founders
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`Michael S. Swavely, president of Compaq's North American division since May 1989, took a six-month sabbatical
`in January 1991 (which would eventually become retirement effective on July 12, 1991). Eckhard Pfeiffer, then
`president of Compaq International, was named to succeed him. Pfeiffer also received the title of Chief Operating
`Officer, with responsibility for the company's operations on a worldwide
`basis, so that Canion could devote more time to strategy.[21] Swavely's
`abrupt departure in January led to rumors of turmoil Compaq's executive
`suite, including friction between Canion and Swavely, likely as Swavely's
`rival Pfeiffer had received the number two leadership position. Swavely's
`U. S. marketing organization was losing ground with only 4% growth for
`Compaq versus 7% in the market, likely due to short supplies of the LTE
`386s from component shortages, rivals that undercut Compaq's prices by
`as much as 35%, and large customers who did not like Compaq's
`dealer-only policy.[22] Pfeiffer became President and CEO of Compaq
`later that year, as a result of a boardroom coup led by board chairman
`Ben Rosen that forced co-founder Rod Canion to resign as President
`and CEO.[23]
`
`Aerial map of the Compaq
`headquarters, now the Hewlett-
`Packard USA campus in
`unincorporated Harris County, Texas
`
`Pfeiffer had joined Compaq from Texas Instruments, and established
`operations from scratch in both Europe and Asia. Pfeiffer was given $20,000 USD [citation needed] to start up
`Compaq Europe. He started up Compaq's first overseas office in Munich in 1984. By 1990, Compaq Europe was
`a $2 billion business and number two behind IBM in that region, and foreign sales contributed 54 percent of
`Compaq's revenues.[24][25] Pfeiffer, while transplanting Compaq's U. S. strategy of dealer-only distribution to
`Europe, was more selective in signing up dealers than Compaq had been in the U. S. such that European dealers
`were more qualified to handle its increasingly complex products.[26]
`
`During the 1980s, under Canion's direction Compaq had focused on engineering, research, and quality control,
`producing high-end high-performance machines with high profit margins that allowed Compaq to continue investing
`in engineering and next-generation technology. This strategy was successful as Compaq was considered a trusted
`brand while many other IBM clones were untrusted due to being plagued by poor reliability. However by the end
`of the eighties many manufacturers had improved their quality and were able to produce inexpensive PCs with off-
`the-shelf components, incurring none of the R&D costs which allowed them to undercut Compaq's expensive
`computers.[9] Faced with lower-cost rivals such as Dell Computer, AST Research, and Gateway 2000, Compaq
`suffered a $71 million loss for that quarter, their first loss as a company, while the stock had dropped by over two-
`thirds.[27][28] An analyst stated that "Compaq has made a lot of tactical errors in the last year and a half. They were
`trend-setters; now they are lagging". Canion initially believed that the 1990s recession was responsible for
`Compaq's declining sales but insisted that they would recover once the economy improved, however Pfeiffer's
`observation of the European market noted that it was competition as rivals could match Compaq at a fraction of the
`cost. Under pressure from Compaq's board to control costs as staff was ballooning at their Houston headquarters
`despite falling U.S. sales, while the number of non-U.S. employees had stayed constant, Compaq made its first-
`ever layoffs (1400 employees which was 12% of its workforce) while Pfeiffer was promoted to EVP and COO.[9]
`
`Rosen and Canion had disagreed about how to counter the cheaper Asian PC imports, as Canion wanted Compaq
`to build lower cost PCs with components developed in-house in order to preserve Compaq's reputation for
`engineering and quality, while Rosen believed that Compaq needed to buy standard components from suppliers and
`reach the market faster. While Canion developed an 18-month plan to create a line of low-priced computers,
`Rosen sent his own Compaq engineering team to Comdex without Canion's knowledge and discovered that a low-
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`priced PC could be made in half the time and at lower cost than Canion's initiative.[9][29] It was also believed that
`Canion's consensus-style management slowed the company's ability to react in the market, whereas Pfeiffer's
`autocratic style would be suited to price and product competition.
`
`Rosen initiated a 14 hour board meeting, and the directors also interviewed Pfeiffer for several hours without
`informing Canion. At the conclusion, the board was unanimous in picking Pfeiffer over Canion. As Canion was
`popular with company workers, 150 employees staged an impromptu protest with signs stating "We love you Rod."
`and taking out a newspaper ad saying "Rod, you are the wind beneath our wings. We love you."[12] Canion
`declined an offer to remain on Compaq's board[25] and was bitter about his ouster as he didn't speak to Rosen for
`years, although their relationship became cordial again. In 1999, Canion admitted that his ouster was justified,
`saying "I was burned out. I needed to leave. He [Rosen] felt I didn't have a strong sense of urgency". Two weeks
`after Canion's ouster, five other senior executives resigned, including remaining company founder James C. Harris
`as SVP of Engineering. These departures were motivated by an enhanced severance or early retirement, as well as
`an imminent demotion as their functions were to be shifted to vice presidents. [30]
`
`Market ascension
`
`Under Pfeiffer's tenure as chief executive, Compaq entered the retail computer market with the Presario which one
`of the first manufacturers in the mid-1990s to market a sub-$1000 PC. In order to maintain the prices it wanted,
`Compaq became the first first-tier computer manufacturer to utilize CPUs from AMD and Cyrix. The two price
`wars resulting from Compaq's actions ultimately drove numerous competitors from the market, such as Packard
`Bell and AST Research. From third place in 1993, Compaq had overtaken Apple Computer and even surpassed
`IBM as the top PC manufacturer in 1994, as both IBM and Apple were struggling considerably during that
`time.[31] Compaq's inventory and gross margins were better than that of its rivals which enabled it wage the price
`wars.[27][32]
`
`Compaq had decided to make a foray into printers in 1989, and the first models were released to positive reviews
`in 1992. However, Pfeiffer saw that the prospects of taking on market leader Hewlett Packard (who had 60%
`market share) was tough, as that would force Compaq to devote more funds and people to that project than
`originally budgeted. Compaq ending up selling the printer business to Xerox and took a charge of $50 million.[9][33]
`
`On June 26, 1995, Compaq reached an agreement with Cisco Systems Inc. in order to get into networking,
`including digital modems, routers, and switches favored by small businesses and corporate departments, which was
`now a $4 billion business and the fastest-growing part of the computer hardware market. Compaq also built up a
`network engineering and marketing staff.[34]
`
`Management shuffle
`
`In 1996, despite record sales and profits at Compaq, Pfeiffer initiated a major management shakeup in the senior
`ranks.[35] John T. Rose, who previously ran Compaq's desktop PC division, took over the corporate server
`business from SVP Gary Stimac who had resigned. Rose had joined Compaq in 1993 from Digital Equipment
`Corporation where he oversaw the personal computer division and worldwide engineering, while Stimac had been
`with Compaq since 1982 and was one of the longest-serving executives. Senior Vice-President for North America
`Ross Cooley announced his resignation effective at the end of 1996. CFO Daryl J. White, who joined the company
`in 1984, resigned to run Principal Micro Inc. Michael Winkler, who joined Compaq in 1995 to run its portable
`computer division, was promoted to general manager of the new PC products group. [25]
`(http://www.nytimes.com/1996/07/03/business/compaq-regroups-into-3-management-units.html)[36] Earl Mason,
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`hired from Inland Steel effective on May 1996, immediately made an impact as the new CFO. Under Mason's
`guidance, Compaq utilized its assets more efficiently instead of focusing just on income and profits, which increased
`Compaq's cash from $700 million to nearly $5 billion in one year. Also Compaq's return on invested capital (after-
`tax operating profit divided by operating assets) has doubled to 50 percent from 25 percent in that period.[27]
`
`Compaq had been producing the PC chassis at its plant in Shenzhen, China to cut costs. In 1996, instead of
`expanding its own plant, Compaq asked a Taiwanese supplier to set up a new factory nearby to produce the
`mechanicals, with the Taiwanese supplier owning the inventory until it reached Compaq in Houston.[36] Pfeiffer also
`introduced a new distribution strategy, to build PCs made-to-order which would eliminate the stockpile of
`computers in warehouses and cut the components inventory down to two weeks, with the supply chain from
`supplier to dealer linked by complex software.[37]
`
`Vice-President for Corporate Development Kenneth E. Kurtzman assembled five teams to examine Compaq's
`businesses and assess each unit's strategy and that of key rivals. Kurtzman's teams recommended to Pfeiffer that
`each business unit had to be first or second in its market within three years—or else Compaq should exit that line.
`Also, the company should no longer use profits from high-margin businesses to carry marginally profitable ones, as
`instead each unit must show a return on investment.[36] Pfeiffer's vision was to make Compaq a full-fledged
`computer company, moving beyond its main business of manufacturing retail PCs and into the more lucrative
`business services and solutions that IBM did well at, such as computer servers which would also require more
`"customer handholding" from either the dealers or Compaq staff themselves.[37] Unlike IBM and HP, Compaq was
`not going to build up field technicians and programmers in-house as these could be costly assets, instead Compaq
`would leverage its partnerships (including these with Andersen Consulting and software maker SAP) to install and
`maintain corporate systems. This allowed Compaq to compete in the "big-iron market" without incurring the costs
`of running its own services or software businesses. [26] (http://www.businessweek.com/stories/1996-07-
`21/compaq-at-the-crossroads)
`
`In January 1998, Compaq was at its height. CEO Pfeiffer boldly predicted that the Microsoft/Intel "Wintel"
`duopoly would be replaced by "Wintelpaq".
`
`Acquisitions
`
`Pfeiffer also made several major (and some minor) acquisitions. In 1997, Compaq bought Tandem Computers,
`known for their NonStop server line. This acquisition instantly gave Compaq a presence in the higher end business
`computing market. Minor acquisitions centered around building a networking arm and included NetWorth (1998)
`based in Irving, Texas and Thomas Conrad (1998) based in Austin, Texas. In 1997 Microcom was also acquired,
`based in Norwood, MA, which brought a line of modems, Remote Access Servers (RAS) and the popular Carbon
`Copy software.
`
`In 1998, Compaq acquired Digital Equipment Corporation for a then-industry record of $9 billion USD. The
`merger made Compaq, at the time, the world's second largest computer maker in the world in terms of revenue
`behind I.B.M.[27] Digital Equipment, which had nearly twice as many employees as Compaq while generating half
`the revenue, had been a leading company in the previous generation of computing during the 1970s and early
`1980s. However, Digital had struggled during the 1990s, with high operating costs and for nine years the company
`had lost money or barely broke even, and had recently refocused itself as a "network solutions company". In 1995,
`Compaq had considered a bid for Digital but only became seriously interested in 1997 after Digital's major
`divestments and refocusing on the Internet. At the time of the acquisition, services accounted for 45 percent of
`Digital's revenues (about $6 billion) and their gross margins on services averaged 34 percent, considerably higher
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`than Compaq's 25% margins on PC sales and also satisfying customers who had demanded more services from
`Compaq for years. Compaq had originally wanted to purchase only Digital's services business but that was turned
`down.[27] (http://money.cnn.com/magazines/fortune/fortune_archive/1999/05/24/260278/) When the
`announcement was made, it was initially viewed as a master stroke as it immediately gave Compaq a 22,000
`person global service operation to help corporations handle major technological purchases (by 2001 services made
`up over 20% of Compaq's revenues, largely due to the Digital employees inherited from the merger), in order to
`compete with IBM. However it was also risky merger, as the combined company would have to lay off 2000 from
`Compaq and 15,000 from Digital which would potentially hurt morale. Furthermore Compaq fell behind schedule in
`integrating Digital's operations, which also distracted the company from its strength in low-end PCs where it used to
`lead the market in rolling out next-generation systems which let rival Dell grab market share.[9][38] Reportedly
`Compaq had three consulting firms working to integrate Digital alone.[39]
`
`However, Pfeiffer had little vision for what the combined companies should do, or indeed how the three
`dramatically different cultures could work as a single entity, and Compaq struggled from strategy indecisiveness and
`lost focus, as a result being caught in between the low end and high end of the market.[40] Mark Anderson,
`president of Strategic News Service, a research firm based in Friday Harbor, Wash. was quoted as saying The
`kind of goals he had sounded good to shareholders – like being a $50 billion company by the year 2000, or
`to beat I.B.M. – but they didn't have anything to do with customers. The new C.E.O. should look at
`everything Eckhard acquired and ask: did the customer benefit from that. If the answer isn't yes, they
`should get rid of it. On one hand, Compaq had previously dominated the PC market with its price war but was
`now struggling against Dell, which sold directly to buyers, avoiding the dealer channel and its markup, and built each
`machine to order to keep inventories and costs at a minimum.[39] At the same time, Compaq, through its
`acquisitions of the Digital Equipment Corporation last year and Tandem Computer in 1997, had tried to become a
`major systems company, like I.B.M. and Hewlett-Packard. While IBM and HP were able generate repeat business
`from corporate customers to drive sales of their different divisions, Compaq had not yet managed to make its newly
`acquired sales and services organizations work as seamlessly.[41][42]
`
`Ouster of Pfeiffer
`
`In early 1998, Compaq had the problem of bloated PC inventories. By summer 1998, Compaq was suffering from
`product-quality problems. Robert W. Stearns, SVP of Business Development, said "In [Pfeiffer's] quest for
`bigness, he lost an understanding of the customer and built what I call empty market share--large but not
`profitable", while Jim Moore, a technology strategy consultant with GeoPartners Research in Cambridge, Mass.,
`says Pfeiffer "raced to scale without having economies of scale." The "colossus" that Pfeiffer built up was not nimble
`enough to adapt to the fast-changing computer industry. That year Compaq forecast demand poorly and
`overshipped too many PCs, causing resellers to dump them at fire sale prices, and since Compaq protected
`resellers from heavy losses it cost them two quarters of operating profits. [28]
`(http://money.cnn.com/magazines/fortune/fortune_archive/1999/05/24/260278/)
`
`Pfeiffer also refused to develop a potential successor, rebuffing Rosen's suggestion to recruit a few executives to
`create the separate position of Compaq president. The board complained that Pfeiffer was too removed from
`management and the rank-and-file, as he surrounded himself with a "clique" of Chief Financial Officer Earl Mason,
`Senior Vice-President John T. Rose, and Senior Vice-President of Human Resources Hans Gutsch. Current and
`former Compaq employees complained that Gutsch was part of a group of senior executives, dubbed the "A team",
`who controlled access to Pfeiffer. Gutsch was said to be a "master of corporate politics, pitting senior vice
`presidents against each other and inserting himself into parts of the company that normally would not be under his
`purview". Gutsch, who oversaw security, had an extensive security system and guard station installed on the eight
`
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`Elec. & Telecomm'ns Research Inst., Patent Owner
`Dell, HP & NetApp., Petitioners
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`Compaq - Wikipedia, the free encyclopedia
`floor of CCA-1, where the company's senior vice presidents worked.[43] There were accusations that Gutsch and
`others sought to divide top management, although this was regarded by others as sour grapes on the part of
`executives who were shut out of planning that involved the acquisitions of Tandem and Digital Equipment
`Corp.[30][44] Pfeiffer reduced the size of the group working on the deal due to news leaks, saying "We cut the team
`down to the minimum number of people - those who would have to be directly involved, and not one person more".
`Robert W. Stearns, Compaq's senior vice president for business development, with responsibility for mergers and
`acquisitions, had opposed the acquisition of Digital as the cultural differences between both companies were too
`great, and complained that he was placed on the "B team" as a result.[45]
`
`Compaq entered 1999 with strong expectations. Fourth-quarter 1998 earnings reported in January 1999 beat
`expectations by six cents a share with record 48 percent growth. The company launched Compaq.com as the key
`for its new direct sales strategy, and planned an IPO for AltaVista toward the end of 1999 in order to capitalize on
`the dotcom bubble.[46] However, by February 1999, analysts were sceptical of Compaq's plan to sell both direct
`and to resellers. Compaq was hit with two class-action lawsuits, as a result of CFO Earl Mason, SVP John Rose,
`and other executives selling $50 million USD of stock before a conference call with analysts, where they noted that
`demand for PCs was slowing down.[47][48][49]
`
`On April 17, 1999, just nine days after Compaq reported first-quarter profit being at half of what analysts had
`expected, the latest in a string of earnings disappointments, Pfeiffer was forced to resign as CEO in a coup led by
`board chairman Ben Rosen. Reportedly, at the special board meeting held on April 15, the directors were
`unanimous in dismissing Pfeiffer. The company's stock had fallen 50 percent since its all-time high in January
`1999.[39] Compaq shares, which traded as high as $51.25 early in 1999, dropped 23 percent on April 12, the first
`day of trading after the first-quarter announcement and closed the following Friday at $23.62.[50] During three out
`of the last six quarters of Pfeiffer's tenure, the company's revenues or earnings had missed expectations.[51] While
`rival Dell Computer had 55% growth in U.S. PC sales in the first quarter of 1999, Compaq could only manage
`10%.[30][41][42][52] Rosen suggested that the accelerating change brought about by the Internet had overtaken
`Compaq's management team, saying "As a company engaged in transforming its industry for the Internet era, we
`must have the organizational flexibility necessary to move at Internet speed." In a statement, Pfeiffer said "Compaq
`has come a long way since I joined the company in 1983" and "under Ben's guidance, I know this company will
`realize its potential."[53] Rosen's priority was to have Compaq catchup as an E-commer