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New Compaq CEO draws mixed reviews

New Compaq CEO draws mixed reviews

Compaq's decision to turn in-house for a CEO is drawing praise from some and raised eyebrows from others who question whether the new skipper, Michael Capellas, can right the computer giant's listing ship.

It took Compaq three months to find a successor for the ousted CEO Eckhard Pfeiffer. After reportedly failing in attempts to attract a high-profile outsider, it named Michael Capellas president and CEO.

A relative unknown, Capellas came to Compaq as chief information officer 11 months ago from Oracle. More recently, he has served as the company's acting chief operating officer whose channel-friendly approach and logistical expertise were described by the industry as a breath of fresh air in the Digital-acquisition-strained world of Compaq officialdom.

"Capellas seemed like a very qualified CIO," says Louis Mazzucchelli, an analyst with Gerard, Klaver and Mattison in New York. "We'll see if he can rise to the challenge of being a CEO.

"There are a bunch of open issues. Can he effectively manage a large sales force and multiple direct distribution channels? Can he develop and nurture a large corporate culture? Can he set corporate strategy and corporate positioning and drive implementation of those things?" Mazzucchelli asks. "There's nothing in Capellas' resume that screams that he can."

Although lacking critical experience as a CEO, Capellas, 44, brings to Compaq a wealth of experience in electronic commerce, supply chain management and IT from his days at Oracle, SAP America and Schlumberger. Analysts believe that type of background is critical to turning Compaq around.

"Naming Capellas president and CEO is a solid and welcome move as he comes from an enterprise background and his experience lies there rather than in the commodity PC market," says Hal Kuff, manager of systems and networking at TESSCO, a US distributor of communications products.

"Any lack of history as a CEO is not a concern to the user community."

At a press conference held in New York to announce Capellas' appointment, Compaq chairman Benjamin Rosen said Capellas was the only candidate to whom the board made an offer. However, several high-profile candidates, including Oracle president Ray Lane, had reportedly removed themselves from consideration.

Capellas said he took the job with no guarantees or expectations regarding Rosen's continued involvement in decision making. The Rosen-led office of the chief executive, which has been running the company since its ousting of former CEO Eckhard Pfeiffer, will be disbanded immediately.

According to Rosen, his new CEO is extremely capable and was instrumental in realigning the company into three business units. In addition, Rosen pointed out Capellas was effectively running Compaq in the wake of Pfeiffer's sacking.

As for the man himself, speaking confidently and passionately, Capellas said he will present a further reorganisation plan to the company this week, but he declined to provide details.

Capellas' selection may be the most high-profile CEO appointment without previous chief executive experience since Novell tapped Sun chief technologist Eric Schmidt in 1997. But while he seems to have the "meat-and-potatoes" ability to run a company, it is questionable whether he has the "star quality" necessary to make Compaq stand out in the eyes of the public.

"Has he got the necessary presence to be a leader in an industry where presence counts?" wondered Roger Kay, a desktop market analyst with International Data Corp. "He's got the basic industry, daily decision-making power you need to do the job, but the other piece of it is the public persona," he said.

"It's increasingly important to have a real character at the top," Kay added. "If it's not a founder, like Steve Jobs or Bill Gates, then you need an industry leader with the polished resume and a sort of star quality."

However, the truth is that Compaq needs a CEO with some high-tech knowledge, and choosing an insider will resonate well with customers who are looking for some stability from the company.

Analysts warn that Capellas faces the "near-impossible" task of turning around Compaq's fortunes. The company has been struggling ever since it acquired Digital Equipment early in 1998, principally trying to deal with the problem of how to integrate Digital's vast workforce. In addition, Capellas starts his new job at a time when Compaq's relationship with software partner Microsoft is unclear.

But the new CEO is confident he is up to the task at hand. "While we clearly have challenges in front of us, we are on the right path again, and this company can be a truly great company," he declared.

His top priorities are to complete the restructuring program underway at Compaq; fill the remaining gaps in the vendor's management team, which still lacks a chief financial officer; clean up Compaq's product offerings to eliminate overlap; develop a clear electronic commerce strategy; and move more of the company's business to direct sales.

The Internet will serve as "the integrating factor" for all of Compaq's efforts, he said. The company will also continue to develop its services business.

"We want to offer services with everything we do, as a component of our consumer business as well as the enterprise," he said.

Asked who approached whom about the possibility of his taking the CEO slot, he replied: "I've never written a resume in my life, and I've never sought out a job in my life." Then again, Eckhard Pfeiffer didn't either - until he came to Compaq . . .

Compaq

Founded: 1982

Products: Desktop systems, PC servers, notebooks, networking software and hardware, storage, services1998 revenue: $US31.2 billionRanking: Fortune 42Chairman: Benjamin Rosen


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