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Leaner Compaq serves a fresh start

Compaq closes the book on a difficult period as server range looks better positioned than ever
Written by Martin Veitch, Contributor

About 13 months ago, Compaq warned of a first-quarter earnings shortfall, prompting the acrimonious departure of Eckhard Pfeiffer and the firm's chief financial officer.

Financially, Compaq has stood still since then, with $9.5bn (£6.01bn) quarterly revenues staying almost constant in an industry where growth rates of 20 percent are considered the norm. Share growth has also been single-digit despite rivals such as Dell seeing its paper value grow by about a quarter.

However, there is a silver lining in the shape of Compaq's server business, which is expected to be buoyed by long-awaited Alpha-based multiprocessing servers, codenamed Wildfire, on 16 May. Compaq also remains the leader in Intel-based PC servers and hopes to cash in on that strength through the growth of offsite hosting services such as ISPs and application service providers.

Some Compaq watchers said the company is now much more flexible on pricing terms.

"They're certainly more competitive than a year ago," said Trevor Pugsley, hardware marketing manager at Computacenter, one of Compaq's largest UK resellers and often a rival in services bids. "Previously they had internal rules on not being allowed to bid under cost but what is cost when everyone knows how PC prices fall?"

Computacenter has also endorsed Compaq's decision to pull the plug on Windows NT support for servers based on its Alpha processor, and now sells AlphaServers. "They have cleaned up their act a lot," Pugsley said. "Well over 90 percent of Alpha sales were Unix so commercially it was a no-brainer. Now we believe they're in Unix for the long-term and they have a coherent story."

Even executives who left the firm in the last year believe Compaq is stronger in most ways.

"They've gone back to basics with ProLiant servers and the strategy is a lot clearer," said a former UK manager speaking on condition of anonymity. "But I still don't know what their plan is with services and I believe Intel's release of Itanium will place tremendous pressure on Alpha."

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