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NEWS ANALYSIS By Steve Hamm October 1, 1999


Yes, Eckhard Pfeiffer Does "Get" the Net
Ousted last year as Compaq CEO, he's now using his golden Rolodex for Net startup Intershop

It seems an odd match: A former PC company CEO who lost his job because he didn't grasp the Internet joins a Net startup as chairman. Eckhard Pfeiffer, who ran Compaq Computer Corp. until last April, has signed on to be a key adviser to Intershop, a seller of e-commerce software. There's some logic to the matchup, however. For starters, it's an opportunity for Pfeiffer, a native of Germany, to lend a helping hand to a company that was started in his homeland and is one of the brightest stars of the country's new NASDAQ-style stock market, Neur Markt. What does Pfeiffer get out of the deal? It's a chance to learn about e-business from the inside -- which could aid him in his new career as an angel investor in startups.

Intershop, which is now based in San Francisco, announced the appointment on Oct. 1 -- the eve of its launch of "enfinity," a new product aimed at the kind of Global 2000 customers Pfeiffer got to know well as the head of the world's largest PC company. Pfeiffer will not be an Intershop manager but will lend the company credibility and open doors by participating in press and analyst tours, meeting with customers, and sharing an address book that includes the names of many of the world's top CEOs and chief information officers. Pfeiffer made an investment in the company, but won't say how much.

Pfeiffer was criticized when he was at Compaq for being slower than rival Dell Computer Corp. to take full advantage of the Web. He denies being out of it -- and claims that Compaq was well along in selling consumer PCs on the Web and was a bona fide player thanks to its AltaVista search engine subsidiary. Still, he reveals that the enormity of the e-business opportunity has only become clear since he left Compaq. "The Internet is clearly a driver of the economy," he says. "It's so unusual and unpredictable. Everybody is struggling with it. They're asking how real are the valuations. What's next?"

 

Pfeiffer has decided against being a CEO again: "You have to put a 100% commitment in, and I've been doing that long enough"
 

That, of course, was the question he was asking himself about his own career, too. Pfeiffer entertained several potential job offers since he left Compaq, including the opportunity to run a couple of Net companies, he says. But he decided against being a CEO again. "You have to put a 100% commitment in, and I've been doing that long enough," he says. Instead, he'll continue to sit on the boards of General Motors, Bell Atlantic, and Hughes Electronics and concentrate on investing. Two venture-capital firms (which he would not identify) are talking to him about becoming a partner, and others have urged him to start up an investment firm focusing on the Net in Europe.

For now, he's concentrating on Intershop. The company was started by CEO Stephan Schambach in 1994 and has grown to 500 employees and a stock valuation of nearly $2 billion. Revenues are still quite low, but growing fast. It reported $10.4 million in the second quarter, up 167% from a year earlier. The company had a net loss of $4.7 million, but Schambach expects to report a profit within the next two quarters. It ranks No. 3 in the worldwide market for seller-side e-commerce software, with an 8.4% share last year, according to Dataquest Inc.

 UNHEALED WOUNDS. Pfeiffer is still learning about Intershop, so he relies on Schambach to explain its strategy. But he doesn't shy away from analyzing Compaq -- nor from criticizing its board for forcing him out. Clearly the wounds haven't healed. He points out that the company's stock hit an all-time high in January and insists it would not have fallen sharply except for a "communications problem" with Wall Street -- when the company gave poor guidance about its earnings. He claims the integration of Digital Equipment Corp. was on schedule, and says "a major recovery plan was already done that would have been executed." In fact, he says, that's basically the blueprint that Compaq's new management team has followed. "It's mostly what existed, except this delay in execution," he says.

Pfeiffer aims to put his hurt feelings about Compaq behind him, though, as he pushes ahead with his e-business agenda. He recently attended a conference in Munich focused on angel investing in Europe. Plus, GM and the other companies where he's a director are plunging full-tilt into e-business. With all of that swirling around Pfeiffer, it's unlikely he'll ever again be accused of not getting the Net.

Hamm is Software editor for Business Week in New York.


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