Compaq CEO envisions a wireless future

Speaking at the company's annual meeting for analysts, Compaq CEO Michael Capellas outlined his vision of a world in which "all kinds of devices" will access the Internet over an expanding grid of servers.

With the rise of wireless handhelds, phones and pagers that can access the Internet and interface with multiple servers, a change is taking place, he said in Houston.

In the new distributed computing age, PCs won't remain the primary devices accessing servers. Instead, servers will dish out data to a wide range of machines, including PCs, handheld computers, mobile phones, pagers and Internet appliances via wired and wireless connections.

"The world is going back to distributed computing," he said. "I really do believe this is the foundation of how the world will look."

Internet connections inside cars will become prevalent as well, he said. "The wireless Internet will continue to make things change very rapidly. It won't be more than a couple of years before virtually every car has Internet access built in."

In fact, it's a service that Capellas could have used Friday morning. The meeting started about 30 minutes late because Capellas got stuck behind a six-car pileup. Capellas was "far enough away to not be involved, but close enough not be able to get around it," he said.

Compaq's role in the future that Capellas outlined will be to provide hardware and other technology. The company enjoys an inherent strength, he said, because it already sells traditional PCs, as well as handheld and Internet appliances.

When it comes to big servers, Compaq garnered $800 million in revenue last year from its Alpha Server GS, otherwise known as Wildfire. Although this was below Compaq's original goal of $1 billion, the component issues that contributed to the shortfall have been eliminated, some analysts have said.

As a result of the changing environment, Compaq sees opportunity in storage, Web-content serving, home networks and home entertainment.

"The personal computer will become the center of home entertainment. People still have a love for the computer," Capellas said.

The company has also seen a rise in some of its vertical markets, especially life sciences. It has, for example, signed an agreement with Sandia National Laboratories to build a new Alpha processor-based supercomputer. It also has been working with the U.S. Department of Defense and the Singapore government. Singapore wants to use computer modeling, which requires large amounts of computing power, to determine why Singaporean prostate cancer levels are high, Capellas said.

He seemed most excited about the market for mobile Internet access. There, Compaq will sell the devices, ranging from its iPaq handheld computer to Compaq-branded BlackBerry pagers, and the servers that provide access, serve Web pages and handle databases.

Capellas also used the meeting to reiterate expectations of a slowdown in the first six month of the year.

"There's absolutely no surprise there will be continued price pressure throughout the first half," he said.

European sales and most of Compaq's large global accounts will be less affected than U.S. sales, he predicted.

"We think there will be a continued build out of the Web in (big) accounts," he said. "I think you're going to see spending on IT, just very wisely in some segments."

Despite Capellas' upbeat vision of the future, Compaq's problems are not solved.

"A good friend of mine once said, 'Only the paranoid survive.' We understand that, and we keep looking around us."