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Compaq CEO rakes it in

Last year was a good year for Compaq's Eckhard Pfeiffer, who earned $70.1 million in salary and options.

Last year was a good year for Compaq (CPQ) chief executive Eckhard Pfeiffer, who earned $70.1 million in salary and options, according to the computer maker's Securities and Exchange Commission filing today.

What remains to be seen is what his compensation will be in 1998, given Compaq's warning last Friday that its first-quarter results would fall short of Wall Street's expectations. The PC giant said that its revenues would be flat and that its earnings basically would break even over year-ago figures, causing its stock to tumble nearly 9 percent in the days that followed to close at 25-3/8 today, down 1/16 over yesterday.

Management and compensation consultants said Pfeiffer earned his salary last year as the computer maker's revenues rose to $24.6 billion in 1997, up from $20 billion the previous year. The company's net profits for the year rose to $2.1 billion, excluding one-time charges, compared with $1.3 billion a year ago.

"You want an executive like this to focus on shareholder value, and that's clearly what he has done," said David Mather, a managing director at Christian & Timbers, an executive search and consulting firm. "Not only has he produced great business results, but also great shareholder value."

Like many executives in the high-tech industry, the vast majority of Pfeiffer's compensation came from granted options, which based on the exercise price of $36.66 a share are valued at $64.1 million. The 1.75 million in options, however, are under water given where Compaq's stock is trading today.

Pfeiffer was given the same number of options last year, but the exercise price was $12.58 cents after adjusting for splits. His 1997 base salary of $1.25 million was the same as the previous year, but his bonus and deferred bonus rose slightly. The CEO earned a $3.25 million bonus in 1997, up from $3 million a year earlier, and his deferred bonus rose to $1.5 million last year, up from $1.25 million the previous year.

Compaq's board considered three areas in determining Pfeiffer's bonus: financial results, strategic planning, and leadership.

"Mr. Pfeiffer's direction of Compaq's operations in 1997 resulted in record-setting financial results and an improvement in gross margins," the board stated in the SEC filing.

The board also cited the Pfeiffer's strategic acquisition of Tandem Computers--which successfully moved Compaq into the enterprise computing market--and the rise of Compaq's stock. Adjusted for a 5-for-2 stock split last July and for a 2-for-1 split in January, Compaq's shares closed 1997 at $28.25 a share, compared with $14.80 a share at the end of 1996.

In 1992 dollars, investors placing $100 in Compaq's shares would be holding nearly $870 at the end of 1997. The stock far outperformed other indexes, as that same amount invested in the S&P Computer Index during the same time period would have left investors with $350 and $252 if invested in the S&P 500 Index, according to the filing.