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Quick choice of leader seen critical for Compaq; CEO ousted as company grapples with PC strategy, two big acquisitions; Computer industry


HOUSTON -- Compaq Computer Corp. needs to move quickly to find a replacement for ousted Chief Executive Officer Eckhard Pfeiffer as the No. 1 personal computer maker grapples with its PC strategy and two big acquisitions, analysts said yesterday.

There are few qualified candidates, analysts said, and competition for those executives will be fierce because Hewlett-Packard Co. also is looking for a new CEO. Rick Belluzzo of Silicon Graphics Inc., Eric Schmidt of Novell Inc. and Sam Palmisano of International Business Machines Corp. have been mentioned as good choices for Compaq.

Compaq has struggled for much of the past year to become more competitive with companies like Dell Computer Corp., the No. 1 PC direct seller. At the same time, it is trying to meld the services and sophisticated computers gained from its $9 billion purchase of Digital Equipment Corp. to change from a PC company to a strong rival to IBM and HP.

"The new CEO will have to make very quick decisions about where Compaq will go," said Joel Podolny, professor of strategic management at Stanford University's Graduate School of Business.

"It's not obvious what Compaq's competitive advantage is," Podolny said.

Compaq's board met with Pfeiffer, 57, this weekend and asked him to resign. Chief Financial Officer Earl Mason, 51, also resigned. The departures come nine days after the company warned that first-quarter profit will be less than half what analysts had expected.

Yesterday, shares in Compaq fell 87.5 cents to close at $22.75. The shares tumbled 24 percent last week and have lost more than half their value since reaching a record Jan. 27.

It is likely to take Compaq several months to find a replacement for Pfeiffer, who joined the company in 1983, analysts said. The search is being led by Heidrick & Struggles Chairman Gerard Roche.

Ben Rosen, Compaq's chairman and co-founder who spearheaded Pfeiffer's ouster, will run the company with Vice Chairmen Frank Doyle and Robert Enloe until a new CEO is found. Treasurer Ben Wells will be acting CFO.

While Rosen and the others said they would not be "caretakers" but active in day-to-day management, some are concerned that the company will falter in making big strategic decisions until a permanent replacement is found.

"This company is now being led by committee, and committees don't lead," said analyst Lou Mazzucchelli of Gerard Klauer Mattison, who rates the stock "hold."

"There is more confusion in Compaq now that their leader is gone -- that contributes to the chance the company will underperform."

Pub Date: 4/20/99

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