BUSINESSWEEK ONLINE : SEPTEMBER 4, 2000 ISSUE
COVER STORY Capellas' Turnaround Compaq sells everything from handheld gizmos to $1 million computers. Capellas' plan is to remain a leader in consumer PCs, expand into Net appliances, and reverse the slide on the corporate desktop. Most important, Compaq must win the battle to supply powerful servers. SERVER COMPUTING Compaq is the market leader in server computers running Microsoft's Windows software. Sales grew 40% last quarter--with about one-quarter of those servers running Web sites. Still a question mark is Compaq's high end. Its powerful Alpha servers have just 7% of the Unix market, vs. 28% for Sun Microsystems. Capellas is counting on new machines released this summer to turn the tide. GRADE: B SERVICES This was the gem in the Digital Equipment acquisition two years ago. But Compaq lost key Digital employees. Now, IBM is growing, while Compaq's services revenues declined 4%, to $1.7 billion, last quarter. New General Manager Jeff Lynn is refocusing on Net projects. A reorganization of that group with the sales force should help win deals such as the $250 million contract with Unilever, the Anglo-Dutch consumer-goods giant. GRADE: D CORPORATE PCs Dell's direct-sales approach swept the marketplace, while Compaq couldn't get its own build-to-order system off the ground. Things are improving now. After four quarters with a total of $490 million in operating losses, the unit posted an operating profit of $62 million last quarter. The bright spot: Compaq's new iPAQ desktop, a stripped-down machine that's only sold direct, is on track to rake in sales of 1 billion in a year. GRADE: C+ HOME PCs With sales growing at 38% last quarter, Compaq leads worldwide in home PCs. But in U.S. stores, it trails No. 1 Hewlett-Packard, which overtook Compaq in February and now leads--37% to 31%. Compaq is a trailblazer in the new information-appliance market with Net-access devices--including a kitchen-counter model for e-mailing and Web surfing and a pager-size gadget for Web tunes. Expect more by yearend. GRADE: B+ WEB SITES Compaq has a 14% stake in CMGI, a holding company with interests in 70 Net startups. Compaq was assured of supplying one- third of its computing needs--but handles more than half. It's also making CMGI's Web sites the home pages for some of its PCs and Net devices--and collecting transaction fees if customers make purchases on CMGI's sites. Compaq's PCs have special buttons that take people directly to the Web. GRADE: B _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Compaq's Rockin' Boss COVER IMAGE: Compaq TABLE: Capellas' Turnaround CHART: Sales Growth Is Reviving...Producing Healthier Profits...And Boosting the Stock Price RESUME: Michael David Capellas Thinking Big by Thinking Small ONLINE ORIGINAL: Capellas: From Gridiron to Podium to Home INTERACT E-Mail to Business Week Online

Copyright 2000-2008, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice