Merger caps short, turbulent Compaq history

<<<... "The real story with Compaq was not Digital--it was with Pfeiffer," IDC analyst Roger Kay said. "They basically gave him the keys to the kingdom and never again went back and asked him if he was doing the right thing." The company "ran in a rudderless fashion for about four years," Kay said.

After a three-month search, during which Rosen ran the company though a three-man office of the chief executive, Compaq promoted acting chief operating officer Michael Capellas to chief executive. As the new chief executive, Capellas quickly began re-engineering the company. He sought to simplify product lines and distribution. He emphasised connecting PC and handheld products to the Internet. Compaq slimmed down its desktop PC offerings and later launched the popular iPaq Pocket PC handheld computer. He also placed a heavier emphasis on services. "It wasn't until Capellas came in that (Compaq) really began leveraging the services division," said John Madden, industry analyst with Summit Strategies in Boston.

Capellas' efforts were starting to bear fruit when the high-tech industry in general, and PCs in particular, entered a prolonged slump late last year. Earlier this year, Compaq announced plans to eliminate as many as 8,500 jobs this year. The endgame began this summer, when Fiorina and Capellas began to talk merger. While they've settled on a plan, the payoff is uncertain. "If you put those together, are they going to have an effective strategy? It's a little unclear, Madden said. But, cultural issues aside, "I think services for both of these companies have been at the centre of the bull's-eye."