Compaq restructured its commercial desktop division into two parts yesterday, part of a giant effort to focus on low-cost Internet PCs and devices aimed at corporate customers, a senior Compaq executive said.
The new division will develop the iPaq class of computers unveiled last month, as well as Internet appliances like wireless handheld computers. The other half of the commercial division will continue its focus on traditional PCs, said Jerry Meerkatz, vice president and general manager of Compaq's newly formed Internet Access division. The restructuring was announced internally at Compaq yesterday, Meerkatz said.
Guided by analysts' expectations, Compaq believes the iPaq and similar desktop devices could account for 20 per cent of its total desktop unit shipments in 2000, a figure that could increase to 60 per cent in the next two to three years, Meerkatz said.
Perhaps most significantly, Compaq is considering alternatives to using Intel's microprocessors and Microsoft's Windows software to power those devices. The so-called "Wintel" platform, which has been the mainstay of desktop computing for two decades, may be too complex and powerful for the type of Internet-based computing that businesses will do in the future, Meerkatz said.
"Do you really need what appears to be a very complex operating system to access the Internet? Probably not. Do you really need constantly increasing microprocessor power to access the Internet? The argument would be no. The traditional PC is far more than what is required to gain access to the Internet," Meerkatz said.
By focusing its efforts on the iPaq and other Internet devices, Compaq hopes to stay ahead of an industry trend that analysts say is revolutionising the desktop PC business. IBM and Hewlett-Packard have also announced low-cost, simplified PCs this week that are designed to take up little desk space and be easier to manage. Even Microsoft, the grand Pooh-Bah of the desktop, launched an Internet appliance here this week aimed at consumers.
But Compaq's decision to restructure its PC business into two distinct divisions, and its apparent aggressiveness in trying to wean business customers away from traditional desktops, appears to go further than its competitors.
Compaq is by no means abandoning its relationship with Microsoft and Intel. The companies will continue to work together on desktop computers, workstations and servers. In addition, Compaq's first iPaq device, which is due in the first quarter of 2000 priced from $US499, will run Microsoft operating software and come with a choice of Intel Pentium or Celeron processor.
Nor does Compaq see a viable alternative to Windows currently in the market, although alternatives to Intel's processors exist today, Meerkatz said. "We don't have anything on the design board, and it was Intel and Microsoft that allowed us to come to market so quickly."
Nevertheless, Compaq's openness about its willingness to use an alternative hardware/software platform in desktop computers will ruffle some feathers among its long-time platform partners.
As part of Compaq's restructuring, the traditional PC group will develop workstations, desktops and notebooks, while the Internet devices group includes not only the iPaq but also handheld computers, such as the Aero, and a range of Internet-related content and support services.
The Internet devices division initially includes only a few hundred workers, but the division is expected to grow rapidly, Meerkatz said.
The executive is the first to admit that Compaq's decision to target a new generation of Internet appliances at the traditionally conservative customer market is a risky one. However, the risk for Compaq of continuing to focus on traditional desktops is greater, Meerkatz said. "There are an awful lot of commercial [customers] who don't even want to go there, but they know its inevitable that we will go there."