Compaq's Struggle to Regain Trust and Stay Competitive

Strategic Insights -

Compaq, one of the largest PC manufacturers, is facing significant challenges in regaining the trust of analysts and investors. The company's poor relationship with its former chief executive, Eckhard Pfeiffer, and chief financial officer, Earl Mason, has left a lasting impact. To regain credibility, Compaq needs to address several pressing issues, including finding a new chief executive and overhauling its PC distribution strategy. The company's current strategy of selling directly and through dealers is putting it at a disadvantage against competitors like Dell and Gateway.

Key Takeaways:

  • Compaq's poor relationship with Pfeiffer and Mason has led to a loss of trust among analysts, making it challenging for the company to bounce back.
  • The company needs to find a new chief executive, which will be a difficult task, especially considering rival Hewlett-Packard is also looking for a new leader.
  • Compaq's PC distribution strategy is in disarray, with the company selling directly and through dealers, making it vulnerable to price undercutting by competitors like Dell and Gateway.
  • The company's emphasis on selling directly antagonizes dealers, while focusing solely on dealer sales allows competitors to undercut them.
  • Compaq has failed to effectively communicate its value proposition, with former CEO Pfeiffer transforming the company from a PC manufacturer to a complete computing business without adequately expressing this change.
  • The company's inability to integrate its businesses, including the recently acquired Digital, is causing problems and hindering its ability to compete.
  • Compaq's e-commerce strategy, announced only recently, is a reflection of its struggles to get its message across.
  • The company's goal of reaching $50 billion in sales by 2000, set by Pfeiffer, may be unrealistic, considering the challenges it faces and its recent miss on quarterly estimates by $500 million.

Sources:

  • Gartner Group, analyst Edmund Thompson
  • ICL, electronic commerce manager Dick Emery
  • Compaq Europe, senior vice-president and general manager Andreas Barth