Wall Street analysts in particular were lukewarm on Compaq's (NYSE:CPQ) choice, Michael Capellas, who has been at Compaq for less than a year. Most knew little about the new leader, and warned that he faced a daunting task in turning Compaq around.
David Wu, analyst at ABN Amro, said: "They have to have a CEO that can lay out a plan and execute on it. Talking is cheap, doing is hard.''
They also weren't keen on his early comments about how to help Compaq do better at selling PCs direct, the model its archrival Dell Computer Corp. has used to record tremendous growth.
Capellas, sounding very much like his predecessor, Eckhard Pfeiffer, said he wanted to keep Compaq's sales network but also increase direct sales.
"Today (our direct PC sales) are at 15 percent. By the end of the year, we will be at 25 percent. On a going-forward model, we want to be at 40 percent,'' he said.
Get back to basics
Whether he can make that work remains to be seen, said Ashok Kumar, analyst at US Bancorp Piper Jaffray.
"He has to go back to basics. They need to have a very simple coherent plan and execute," he said.
"Seventy percent of their revenues are from the PC business. They need to get back on track there. Dell has gone in there and won accounts hand over fist."
Capellas also must confront the difficulties Compaq has faced in digesting Digital Equipment Corp., which it bought last year for $8.4 billion. Analysts said what remained of Digital and its service business was losing customers.
But one important constituency is intrigued by Capellas' appointment. Corporate information managers, who generate the lion's share of Compaq's sales, think Capellas could be just what the company needs.
IT in favor
One Compaq customer, a former Digital customer, said Capellas' experience as a CIO and in IT management could prove an asset in Capellas' new job.
"The companies that I've seen put marketing and sales people in as CEO never had to run a full enterprise infrastructure and they have no idea what our (IT) problems are," said Mike May, vice president of IT at Teknion Furniture Systems of Toronto. Teknion uses Compaq's Alpha servers, high-availability network services and outsourced support and maintenance services.
"A CIO I would hope would understand the factors that make life easier, or kills life, for a CIO," May said.
May, whose company has operations in eight countries, said Compaq needs to refocus itself to pull out of its slump. "(Compaq) has a lot of good assets. The service organization is good. Their products -- they're not behind the curve by much. Their pricing is aggressive. It's a matter of how they make it all available to us," he said.
Another said that Capellas should succeed.
"All he has to do is listen to customers,"said Henry Danziger, vice president of IT at Johnson Controls Inc. in Milwaukee, Wis. Danziger proceeded to offer some advice: "If I were to pick my top three things, they would be to plan model transitions so that supply does not dry up between (them), provide an e-commerce solution direct from Compaq and work with internal costs to provide a better cost structure for (Compaq) products."
Reuters and PC Week's John Madden and John Spooner contributed to this report.
