Compaq faces enterprise reinvention challenge, analyst predicts

Compaq faces enterprise reinvention challenge, analyst predicts

The new Compaq must reinvent itself as a serious enterprise-level player to secure its future, an industry analyst warned this week.

Terry Shannon, a well-known US-based IT analyst and journalist, said Compaq needs to shake its "desktop, four-way server" image before it can begin developing mind share as a serious high-end equipment provider. "The biggest issue for the company right now is selling into the enterprise," he said.

Shannon said the new business model is required to help focus Compaq on the special needs of enterprise customers, not consumer-level customers who purchase PCs over the Internet. However, Shannon concedes Compaq's new enterprise division is a sign of its attempts to address the issue. Shannon said market acceptance of the company's merger with Digital remains positive, and indicated it is growing stronger by the quarter. In fact, he believes most of its merger worries have "fallen by the wayside".

To date, Shannon said, Compaq has shed 10,000 of an estimated 15,000 to 17,000 staff earmarked for redundancy as part of the company's post-Digital merger restructuring. Shannon said another 5000 staff will be retrenched from its European operations shortly, but indicated this will be difficult as the region contains a number of strong unions. Staff cuts have come from the Pacific Rim, Africa and the Middle East. When questioned about Compaq's plans for enterprise networking, Shannon was reluctant to make any predictions. However, he conceded Compaq may buy Cabletron as a means of recapturing Digital's networking business.

He said the sale of Digital's networking business to Cabletron earlier this year was "inconsistent with a Compaq buyout" of Digital. He said it was "conceivable" Compaq would seek to redress the issue to boost its enterprise business.

As for the future of Digital's much hyped Alpha 64-bit microprocessor program, Shannon said it will not suffer a blow from the Compaq axe. He described the vendor as "dead serious" about the technology.

"Alpha's looking pretty good, it's certainly looking a lot better since a year ago when Digital owned it," he said.

Shannon said Compaq started shipping third-generation Alpha chips on October 19 -- admittedly one year late. He said he believes Alpha will trail Intel's IA64 as one of the two dominant 64-bit architectures.

Meanwhile, Compaq's largest local systems integrator, Integrand Solutions, is planning to "upskill" its staff in line with an enterprise market push. Shannon predicted a channel shakeout in early 1999 as he believes the company is moving to a tiered approach. A tighter channel structure will lead to the development of select, economically-efficient direct partners, he said.

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