Commentary: Compaq sits out the storm

By Mark Margevicius, John Enck and George Weiss, Gartner Analysts

Considering the economic climate, Gartner believes that Compaq Computer's announcements will only strengthen the company's long-term prospects.

To begin with, the economic slowdown has

	See news story: Wall Street shrugs off Compaq warning

affected other major players in the PC industry, many of which started issuing earnings warnings in the second half of 2000. More recently, many vendors followed up with further warnings, layoffs and restructuring plans, and the shedding of noncore businesses. Those vendors include Dell Computer, Gateway and Intel. Compaq finds itself in good company.

The restructuring announcements--bringing together the consumer and enterprise PC units and selling off RoadRunner--continue the changes that Michael Capellas started when he became president and CEO in July 1999. Capellas inherited a company that had grown too quickly through too many acquisitions (especially Digital Equipment), offered too many different types of products (especially server operating systems) and sold PCs too slowly. Capellas set out to cut costs, improve time to market and customer service, and rationalize products.

Despite making some progress, Compaq has not yet done enough. Making a single PC unit will help. It will also help to shed RoadRunner, a high-speed Internet access service. Those moves will enable Compaq to focus more clearly on its core businesses--an essential discipline for weathering a general economic downturn.

Compaq remains a strong, viable player in its traditional markets, including desktops, laptops, servers, storage, personal digital assistants, and professional services. Gartner's chief concern lies with the server markets. In particular, Compaq has invested to build market share for the Tru64 operating system and, more recently, to retain OpenVMS's share. Should Compaq reduce commitment or resources, progress toward those market share goals would stall.

(For related commentary on what the economic downturn can mean to IT managers, see TechRepublic.com--free registration required.)

Entire contents, Copyright © 2001 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.