Compaq Computer will attempt to jump-start its beleaguered PC business tomorrow by unveiling slick new models and announcing new content partnerships.
The fresh strategy, which will be introduced at a press conference in New York, depends on desktops that Compaq claims are easier to manage. The systems also will come with specialized Internet content and services, according to people familiar with the company's plans.
Rick Belluzzo, the former SGI chief who took over Microsoft's content and consumer division, and executives from CMGI and Intel will be on hand for the presentation. The companies will announce joint participation in a strategic alliance that emphasizes "products, services, relationships, and partnerships," said a source close to the companies.
Compaq isn't the only PC maker moving in this direction. IBM yesterday said it would introduce a simpler, Internet-ready PC code-named EON by early next year. Hewlett-Packard unveiled the e-PC, an intentionally unexpandable system for accessing the Internet that will also come out in 2000.
But the Houston-based PC manufacturer may have the most sense of urgency. When Compaq reported quarterly earnings last month, revenue for its commercial PC unit was down 12 percent compared with year-ago figures. The division, which accounted for 30 percent of the company's third-quarter revenue, lost some $169 million. That figure was down from a comparable second-quarter loss of $225 million.
Days earlier, Dell passed Compaq for the first time to become the No. 1 U.S. PC maker for the first time. Industry sources have said Compaq has been losing strength in certain large accounts.
The computer at the center of Compaq's comeback strategy is the Vista, which blends some of the best attributes of PCs and so-called Internet appliances, according to sources.
Compaq chief executive Michael Capellas in a recent interview with CNET News.com said that convergence is one of the major trends in corporate computing.
"There will be a natural cannibalization of traditional [PCs] with Internet access devices, the Internet appliance, particularly in large companies where application people are writing more server-side applications that exist on the server," he said.
This type of device makes the most sense "particularly if it's wireless" and if "provided as a utility through an ASP, an application service provider," said Capellas.
ASPs host software programs that large companies access remotely, rather than running and managing locally. Earlier this year chipmaker Intel opened an Internet services center offering data and application hosting.
Vista sheds archaic ports and connectors, such as ISA expansion slots, in favor of USB for easily connecting peripherals and =" resources="" info="" glossary="" terms="" nic.html"="">NICs for connecting to corporate networks and the Internet.
Compaq is also looking into offering wireless networking with the Vista, building on a solution recently introduced for Armada notebooks.
"It's the era of land-fill computing," quipped Technology Business Research analyst Lindy Lesperance. "As the cost of PCs go down and people focus on total cost of ownership, it becomes cheaper to just get rid of PCs and buy new ones rather than upgrade what you have."
Compaq will sell Vista for well under $1,000, said sources familiar with the project. The PC will likely be distinguished by new Internet content and services, sources added.
Such a push would dovetail with Capellas' vision. "It's no secret that if you can't sell Internet services, or some services with the box, you won't make very much money," Capellas said last week. "So with the compression of the device, the compression of the prices on it, and really with the commoditization of it, yes, you have to bundle some level of service."