Compaq Computers

Compaq Computer Corporation was founded in February 1982 by Rod Canion, Jim Harris and Bill Murto, three senior managers who left Texas Instruments and invested $1,000 each to form their own company. Their first idea was a portable personal computer that was sketched on a paper placemat in a Houston pie shop. The founders presented their idea to Ben Rosen, president of Sevin Rosen Partners, a high-tech venture capital firm.

The venture capitalists were impressed with the idea of a portable product innovated within the emerging standard and agreed to fund the new company. Their brainchild was the world’s first standard-based portable computer and it was extremely successful. In the first full year of trading, Compaq sold more than 53,000 units and sales reached over $111 million, which is a US business record for a new company. Compaq eventually became well known for the compatibility and quality of its computers and hence its name “Compaq”.

In the first ten years Compaq concentrated on marketing its products for businesses, but by 1993 it finally expanded its business to the consumer markets with its Compaq Presario PC. Compaq became known as worldwide IT Company and supplier of computers. Even though Compaq is in a very competitive industry where alliances are not only formed with one company, but with several at once. Compaq has become one of the world’s most successful companies in the computer industry and has been recognized as Forbes Magazine’s 1997 Company of the Year and is ranked no. in 1998 Fortune’s 500.

Currently, Compaq is partnering with a large number of prominent Canadian and multinational information technology firms, including Asset Software International (ASI), Celestia, Delrina (Symantec), Intel, Lotus, Matrox, Microsoft, Novell, Oracle, SAP, Tandem and many others, in order to gain a competitive advantage by sharing resource, knowledge, and cost. In 1996, Compaq and Intel Corporation began a ten-year cross licensing agreement. Competitors of Compaq include Sony Corp and Dell Computer Corp. , among other companies.

For example, Sony President Nobuyuki Idei was quoted as saying, “In order to compete with Dell and Compaq, we need more speed in the supply chain. We need to build powerful global networks for tighter control of inventories, to see in real time figures like sales, profits, and market demand. ” In other words, it can be said that the industry Compaq is competing in is a very volatile one, where efficiency and timeliness is not a luxury, but rather a prerequisite. Compaq’s five global leadership objectives is to be a leader in Technology, Total Delivered Cost, Marketing/Customer Orientation, Distribution, and Corporate Leadership.

In other words, Compaq’s goal is to lead the industry holistically, not just in one dimension, but on a variety of platforms. An example of this is the vision of the future supported by Compaq, Microsoft, and Intel to provide new revenue opportunities for the television industry. The three will work with the television industry to support higher resolutions, without causing any initial receivers to become obsolete. It is expected that the computer industry will deliver millions of ‘digital sets’ to the market place, as many as 100 million by 2005.

This example demonstrates that while competition is fierce among companies, alliances are also common. Compaq, like other companies in the industry, does not hesitate to merge with others on projects that can be mutually beneficial to all involved parties. In the above example, it can be found that a growing number of companies are lining up to support the computer industry’s standard for digital television, including C-Cube Microsystems Inc. However, Compaq has struggled for much of the past year to become more competitive with companies like Round Rock based Dell Computer corp. , the No. irect PC seller.

At the same time, it’s trying to meld the services and sophisticated computers gained from its $9 billion purchase of Digital Equipment Corp. Compaq’s expansion worldwide has made its presence through a range of geographic divisions with offices in North America, Asia Pacific, Japan, Latin America, China, Europe, the Middle East and Africa. Compaq North America (corporate office) is headquartered in Houston, Texas. Its products and services are sold and supported through a network of more than 25,000 commercial and consumer marketing partners across the United States and Canada.

Compaq’s strategy is: “Make it to the highest quality. Make it reliable. Make it affordable. ” In the company’s first decade, commitment to that mission has made Compaq the largest PC supplier in the world. On July 2, 1996 Compaq announced a significant new organizational structure. The changes included a number of existing and new product divisions being aligned within three customer focused groups: The Enterprise Computing Group, the PC Products Group, and the Consumer Products Group.

With this new organization, Compaq was aiming to further differentiate itself in the marketplace to expand its global leadership. This was done to address the, “increasing customer demand for bundled network solutions and higher levels of service and support”, according to Eckhard Pfeiffer, former CEO. Compaq’s structure is designed to address the needs of the community, to maximize its strategic advantage from the employees it possesses, and to care for the environment. One of the most recent events to affect the organizational structure of Compaq has been the resignation of Eckhard Pfeifer.

Since Mr. Pfeiffer never groomed a successor, like Hewlett-Packard, analysts say the companies may end up competing for executive candidates. The organization is looking for a person with excellent technological experience, but it is willing to look for someone outside the tech sector. Another challenge to the organization would be the tech leader’s ability to mesh the culture of the company. Now, a three-person “office of the president” is running the organization. Board Chairman Benjamin Rosen and board members Frank Doyle and Ted Enloe are heading this office.

The three are currently overseeing the computer maker’s day-to-day operations in an “office of the chief executive”. A concern for the company is the need to execute better along with the need to improve the speed of decision-making in order to stay ahead of the industry curve. Michael Kzialo, director of research, Old Discount Corp. says,”Compaq needs to have a person at the helm who has a good working rapport with the management team and with the board of directors. The company has a lot of potential, but they need help with the execution”.

In other words, Compaq’s entire organizational structure is at stake unless it finds a CEO to lead them flawlessly through this transition period. An annual report of management in 1997 stated that Compaq maintains an effective control structure. It consists of organizational arrangements with clearly defined lines of responsibility and delegation of authority, with comprehensive control procedures. This allows assurance that transactions are executed in accordance with management authorization and generally accepted accounting principles (GAAP).

An internal audit is also performed in order to maintain the control environment. For the internal controls, the company selects and trains its employees carefully. It develops written policies and procedures and provided appropriate communication channels to foster the functioning of controls procedure. The company follows a Compaq’s Codes of Conduct, which enforces strict ethical behavior. It is written in many languages and is distributed to employees throughout the world. It is also reemphasized through internal programs.

The company uses Price Waterhouse LLP, an independent accountant to conduct audits of Compaq’s financial statements. An Audit Committee of the Board of Directors is composed of outside directors and is responsible for recommending to the Board the independent accounting firm to be retained for the coming year. This Audit committee meets periodically and privately with the independent accountants, the internal auditors, and with Compaq management to review accounting, auditing, internal control structure and financial reporting matters.

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