Pfeiffer replacement an outsider?

Pfeiffer resigned Sunday following warnings of lower than expected profits. CFO Earl Mason also resigned, saying he planned to take a top job in an unrelated industry. The resignations have sent shock waves through the PC industry but analysts agree it is probably for the best if Compaq wants to realign itself as an enterprise solutions business.

Philip Williams, senior analyst with Dataquest says the company has suffered trying too hard to be all things to all people. An overhaul is needed: "They need to reorganise. The merger with Digital has not gone that smoothly. It has been harder than expected to make the move from PC manufacturer into the enterprise world," he says. With targets missed for seven successive quarters and no evidence Compaq is overcoming IBM and Dell to become the number one Internet company, Williams believes the resignations were necessary to keep Wall Street happy.

In a conference call Monday Compaq played down its woes, describing itself as no longer a PC company, but an IT company. Given its upbeat mood about it being a good time to make changes, Williams would be surprised if the board appointed someone from within its own ranks to replace Pfeiffer. He says: "I expect they will go for someone with wider experience."

Claims from Compaq that its problems are part of a wider demise in the industry were dismissed by Williams. "From Compaq's point of view it would be nice to think so but there is no evidence to suggest the market is suffering from a general malaise. This is a Compaq only problem."

While the search for a replacement goes on Compaq's board of directors will oversee the day-to-day running of the company, with Ben Wells, the company's treasurer, named as acting CFO.