Can Compaq PC execs succeed in portals?

In a business defined by media and advertising lingo, can hardware executives speak the same language?

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
3 min read
In a business defined by media and advertising lingo, can hardware executives speak the same language?

Since announcing plans to spin off its AltaVista search engine, Compaq Computer has reassigned a number of its consumer PC executives to key management roles within the new company.

But the question remains whether a management team that has traditionally focused on the nuts and bolts of computer manufacturing can make a comfortable transition to the frenetic battle for Web traffic. Or will Compaq eventually need to solicit the help of others with major media experience?

The answer, at least among industry analysts, is an overwhelming yes.

"If AltaVista hopes to compete with the Yahoos of the world, they will need to diversify and get some seasoned media executives involved," Jupiter Communications analyst Mark Mooradian said. "How they do that remains to be seen."

Media partnership inevitable?
Most portal leaders have some form of media expertise within their management ranks, such as America Online's Bob Pittman, Excite's George Bell, the Go Network's Jake Winebaum from Disney, and Snap's Edmund Sanctis from NBC.

Compaq executives do possess valuable knowledge of consumer habits that may transfer well to the portal business. Newly appointed AltaVista president and chief executive Rod Schrock was a force behind Compaq's growth in the consumer PC market, which has risen from $4 billion in revenues to $5 billion in the last year.

Schrock "has been instrumental to the growing consumer business, so I think that by itself is fairly impressive credentials," said Ashok Kumar, an analyst with Piper Jaffray.

Nevertheless, negotiating the wildly gyrating terrain of portals will require a drastic change in mindset. For this reason, the recruitment of media veterans may be inevitable for Compaq.

"Things are moving so quickly to go right from hardware out into the limelight riding a fast-moving media company," said John Robb, an analyst at Gomez Advisors. "It's a highly competitive and highly speculative space. That could give anyone a difficult ride."

Kumar agreed. "They do have good Portalopoly experience in the PC industry, but there's a different skills set that's required," he said. "Either through alliances or acquisitions, they need to bring guys in who are more savvy in the Internet space."

There are indications that the AltaVista team is looking. Before the spin-off, Compaq had been engaged in serious discussions with Time Warner two to three weeks ago, a source familiar with the talks said.

Before those negotiations cooled, the source said, Time Warner was looking at swapping some of its Internet assets for AltaVista--a path that other media companies are expected to follow increasingly follow as they look to invest or acquire Internet companies.

Who's who at AltaVista Company
Name Former position
at Compaq
New position
at AltaVista
Rod Schrock senior VP and group general manager consumer products president and CEO
Ken Barber VP finance, Tandem division CFO
Kurt Losert N/A remains VP and acting general manager, AltaVista Search
Stephanie Lucie senior counsel, securities general counsel
Greg Memo VP and general manager, Presario Mobile VP and general manager, business and technology strategy
Mike Rubin director and co-general manager, Presario desktops VP and general manager, e-commerce
Ronnie Ward VP, enterprise solutions division VP and general manager, e-services
Source: Compaq

Media companies are beginning to look at their own Internet assets and ability to offer marketing and promotion support as a form of payment to acquire or take a stake in other firms.

Disney, for example, gave Starwave to Infoseek as part of its payment for a large stake in the portal company. NBC is using on-air promotions as a form of payment for a minority equity stake in iVillage--a deal that involves no cash.

The IPO carrot
Attracting top media talent may not be the most difficult feat. For a company that is planning to go public, for example, stock options could provide major bargaining chips.

"If you want to hire top talent, it's basically the lure of the IPO," Kumar said. "That's the carrot."

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