Compaq goes beyond pushing boxes out of door
Compaq goes beyond pushing boxes out of door
By Zatni Arbi
JAKARTA (JP): Come to think of it, Michael Capellas must have
gone through much of what our own Gus Dur has been going through.
When he became the CEO of Compaq Computer last year, he inherited
a large company that was struggling hard to stay afloat. It was
not exactly a sinking Titanic, but sales in the first quarter
(Q1) of 1998 were so disappointing that the board thought it was
time for a change in leadership. The then CEO Eckhard Pfeiffer,
whose obsession seemed to be to stay ahead of Dell at any cost,
was fired. A few months later Michael Capellas, an insider,
became the new CEO. Just like Gus Dur, he had a really tough time
after he got on board because of the nightmarish mess left by the
previous regime. But somehow he managed to make substantial
improvements here and there.
About two weeks ago, Capellas reported to Wall Street and
investors a better than expected result for Q2, marking a
turnaround one quarter sooner than what he had promised. That was
no small feat. In the U.S. market, Dell has overtaken Compaq and
become No. 1 PC maker. In the U.S retail area, HP has secured the
top spot thanks to its mouth-watering Pavilion line of home PCs.
In the worldwide PC market, a report from IDC late last month
stated that Compaq still remained No. 1, but Dell was No. 2 and
was closing the gap.
One of the significant steps that Capellas has taken and has
shown significant result was to put manufacturing into the hands
of the respective organizations. At Compaq, there are three
different divisions that sell computer products: the enterprise
computing and services, the commercial and the consumer PC
groups. The enterprise division makes and sells servers and high-
end computers such as the Alpha servers -- all targeting large
enterprises. All the products and technologies that Compaq
acquired when it bought both Tandem and Digital now belong to
this division. Compaq's storage area network system, a system
that holds all the data for a networked enterprise system, also
falls into this division.
Incidentally, while SAN stands for Storage Area Network,
Compaq also has NAS, which stands for Network Attached Storage.
What a lack of creativity in coining names! NAS is used to cache
Web contents rather than to accommodate enterprise data.
The commercial PC group focuses on business PCs, and these
include the desktop side iPaq boxes. The consumer sells the
Presario lines of desktop PCs and notebooks. The legacy-free
iPaq, which was introduced in January of this year, has been a
hit among business users. Many of them report that they have had
to back order these space-saving and securely enclosed PCs to
September. Compaq claims that it has sold 10,000 units of these
iPaq appliances.
But, as we all know, the margins in selling PCs have become
thinner than human hair. It was actually one of the reasons
Compaq was in such frightening shape during the last few months
of Eckhard Pfeiffer's tenure at Compaq. The PC maker was unable
to squeeze production costs low enough to compete with Dell and
other PC makers, some of which were already selling home PCs in
the US$500 price range.
Out of the three divisions, the commercial computer group was
especially lucky to get Michael Winkler as the boss. A company
old-hand, he managed to improve manufacturing and distribution
and lower the overall cost of making and selling his PCs. As it
turned out, the commercial PCs made up the bulk of the profits
that the company made in Q2 of this year and made investors feel
relieved. In Q1, after a negative performance for the whole year,
Mike Winkler's division suffered a loss of $19 million. In Q2, it
made a $62 million profit.
New direction
Compaq has realized that selling boxes will no longer cut it,
despite the fact that improving manufacturing and distribution
has proved to be effective in turning the balance sheet from red
to black. The company knows it has to look for other
opportunities and make the PCs the supporting element. Tan Choon
Seng, vice president and managing director of Compaq Computer
Asia, told me during the one-on-one interview at Compaq
Technology Adventures that, in order to stay on top, the company
has been expanding out of the business of just pushing PC boxes
out of their doors. "We have been looking for business
opportunities, and we will sell our PCs more as the supporting
element to the new businesses." One of the things that he showed
me was a cash card, a smart card that the company is developing
for the Singapore market.
In Indonesia, the company has also approached an undisclosed
list of conglomerates to explore the possibility of jointly
building B2B infrastructure. As I see it, Compaq should be able
to strengthen its presence here, thanks to the strong team at PT
Compaq Computer Indonesia led by B.T. Lim, a veteran in Indonesia
IT industry who knows his territory very well.
The Compaq Technology Adventures exhibition at Regent Hotel,
Jakarta, on July 27 and July 28, also involved 17 of their
partners, including Astra Graphia Information Technology (AGIT),
Oracle, Microsoft, Computer Associates, SAP and Cisco Systems.
Also showcased was a mockup of the AlphaServer system that was
used in the human genome research.
Compaq PCs and notebooks have long been on my list of favorite
computer products. In fact, this article is at this very moment
being written with the help of a four-year old Presario. In an
effort to revive its lead in the PC industry, Compaq has launched
several cool new Presario PCs. However, one of the products that
really caught my eye was the new iPaq H3600 Pocket PC handheld.
This personal digital assistant (PDA) uses the new PocketPC
operating system from Microsoft, which is actually the successor
of Microsoft's less successful Windows CE.
I've requested an opportunity to test drive the iPaq Pocket
PC, and if I'm lucky enough, you'll get more detailed information
about this interesting gear. In the meantime, let us all wish
Michael Capellas the best of luck as he continues to solidify his
company's turnaround. (zatni@cbn.net.id)