Compaq joins the big leagues
Rosen, the venture capitalist extraordinaire who also happened to be chairman of the company, had brought along Tom Kinsley, then a senior consultant for McKinsey, for the kaffeeklatsch. The question du jour: What was going to be different about Compaq in the future?
Seven years later, the results are plain -- Compaq (CPQ) has bought its way into the big leagues.
Monday morning's announcement of a $9.6 billion bid for Digital Equipment Corp. ( DEC) is the most breathtaking move by Pfeiffer to turn Compaq into a computing "uberpower."
The company, which long ago ceased to be simply a PC maker, can now market itself as a one-stop shop that can set up big computer networks with everything from central switching devices for computer networks to fault-tolerant computers.
"It really gets back to Eckhard," says Bob Beach, who ran corporate communications at Compaq until late last year when he moved to a similar job at Traveling Software. "He's stayed true to what was in his mind -- which is for Compaq to play in every part of the marketplace."
That may seem painfully obvious today, but it was less clear in the early 1990s. Compaq, a company that had earned its stripes making PC clones, was slow to shed a strategy as a specialized, BMW-like, seller of high-margin products. That reluctance -- along with a huge quarterly loss -- led to the ouster of Canion. It also led to a new strategy in which Compaq shifted its attention to the enterprise marketplace.
But there was the rub. The company lacked products and services enjoyed by bigger rivals. Compaq's strategy of developing technologies in-house or through partnerships was not enough to arm it with a full range of connectivity products and services.
"The build strategy was just taking a real long time," said Ross Cooley, who used to run the company's North American sales operations. "You can hire people just so fast or create organizations just so fast. Either you drive and embrace change, or it comes back to bite you."
Compaq had the resources to go shopping -- so that's exactly what it did, spending more than $3 1/2 billion dollars between 1995 and 1997 to buy vendors whose products tied PCs into networks: The company bought two Texas-based companies -- Thomas-Conrad, a supplier of network components; and NetWorth, which specialized in developing switches and hubs. Compaq then purchased Microcom for $280 million and Tandem Computers Inc. , two deals that filled out gaps in data communications and high-end transaction processing.
When he first sat down for a job interview with Pfeiffer a couple of years ago, Jim Schraith said the marching orders were clear from the outset.
"His vision was that Compaq was going to be one of the largest enterprise companies in the world," said Schraith, who was vice president and general manager of the North America Division for Compaq and is now the president of ShareWave Inc.
Compaq also profited from its bet that robust servers -- paired with Microsoft's Windows NT operating system -- were increasingly finding their way into corporate sites. At the same time, the addition of Digital's expertise in the services space will fill a hole in Compaq's offering.
"It was a real weakness," Schraith said. "This rounds it out immensely."