Pfeiffer an emblem of tough industry

Eckhard Pfeiffer helped turn Compaq into the largest PC maker but still lost his job--a stark reminder that there's no security in computing today.

Jeff Pelline Staff Writer, CNET News.com
Jeff Pelline is editor of CNET News.com. Jeff promises to buy a Toyota Prius once hybrid cars are allowed in the carpool lane with solo drivers.
Jeff Pelline
3 min read
In short order, Eckhard Pfeiffer helped turn Compaq into the world's largest PC maker, but he still lost his job--a stark reminder that today's computer industry carries no guarantees of security.

Pfeiffer, 57, was named Compaq's chief executive in 1991. At the time, the PC maker suffered from intense competition and eroding profits and sales. Chairman Benjamin Rosen, disappointed by the performance of then-CEO Rod Canion, turned to Pfeiffer to revitalize the company.

Pfeiffer, who began his career with Texas Instruments in Germany and had joined Compaq in 1983, met the challenge. A lover of fast cars and known for his determined, no-nonsense personality, he grew the company rapidly, largely through acquisitions, turning Compaq into the leading PC manufacturer.

"He continued the Compaq tradition of being a hardball player. He squeezed suppliers hard...This viciousness marked Pfeiffer's style, and he also pressed hard on manufacturing, forcing them to greatly increase output and efficiency," said Danny Lam, a director of consulting firm Fisher-Holstein. "However, this business model did not address one principal area of costs: distribution."

Pfeiffer also epitomized the image of a powerful executive. He generally disdained interviews and was flanked often by Compaq employees when traveling at trade shows.

His aggressive revenue-growth projections became legendary. In 1996, Pfeiffer predicted that Compaq would be a $40 billion company by the year 2000, then raised his prediction to $50 billion. The Houston-based PC maker posted $31 billion in revenue for 1998.

But Pfeiffer's goal to build a $50-billion-a-year company was cut short. Rosen stepped in and said it was time to "re-energize this company again."

Pfeiffer's Texas-sized appetite for acquisitions helped lead to his downfall. Unlike a CEO such as John Chambers of Cisco, Pfeiffer had

difficulty integrating the companies he acquired, a difficult task under even ideal circumstances. Two examples: the acquisition of Tandem in June 1997 in a $3 billion stock deal and the buyout of Digital Equipment for $9.6 billion in June 1998.

In addition, analysts said Pfeiffer did not have an effective plan to deal with the onslaught of lower-cost PCs. Apple interim CEO Steve Jobs helped boost his company with the iMac, and 3Com's PalmPilot helped boost its bottom line. By contrast, Pfeiffer generated no such excitement with his brand of PCs.

Pfeiffer also closely aligned himself with Microsoft, calling some to dub Compaq "the Microsoft of the South." Although this proved effective because of Microsoft's clout with its Windows operating system, it also proved risky in an era of expanding Internet devices from many suppliers.

Two weeks ago, stung by the PC price wars, Compaq surprised Wall Street by announcing that its first-quarter profits would be half of expectations. Compaq's stock fell and closed Friday at 23.635--hovering near a 52-week low.

Pfeiffer's resignation follows another management shakeup at a rival computing giant. Last month, Hewlett-Packard chief executive Lewis Platt said he would step down after a major reorganization is complete. HP had a difficult year, coping with industry competition and the Asian economic crisis.

News.com's Mike Ricciuti and Reuters contributed to this report.