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Features - Firm Guidance

AUGUST 21, 2000



The history of the Compaq Computer Corporation dates back to 1981 when three Texas Instruments employees Rod Canion, Bill Murto and Jim Harris sat in a Houston restaurant and sketched out the design of a personal computer on a table napkin. They established a corporation with backing from famed computer venture capitalist Ben Rosen (who funded the start-ups of firms such including Apple, Intel, Lotus, Silicon Graphics and ElectronicÊArts). Compaq produced its first computer in July 1982 and its Portable PC was an immediate success and in 1983 the company turned over $111m. The introduction of a Compaq desktop and increased sales of the laptop trebledÊthatÊfigure in 1984 when Compaq began operating in Europe under another former TI employee EckhardÊPfeiffer.

In 1985 Compaq began trading on the New York Stock Exchange and the following year joined the FortuneÊ500 list, faster than any company in history. By 1987 annual sales had reached $1bn but the rapid growth led to arguments as to the direction the company should take and this led to the ousting of Canion in 1991. Harris departed with him and the pair later established a new company called the Insource Technology Corporation.

Pfeiffer was put in charge of Compaq and oversaw a massive restructuring, cutting staff and improving productivity while diversifying into new areas. He took the company from sales of $3.2bn to $14.7bn in only five years. InÊ1994 Compaq became the largest global supplier of PCs. In the late 1990s the growth rate slowed and, despite the takeover of rival Digital in 1998, there was discontent amongst shareholders that the company was not more involved in the Internet boom. In April 1999 Rosen led a revolt and Pfeiffer was ousted. Rosen took over as interim CEO and immediately began to push Compaq towards the Internet. He swapped the AltaVista search engine (which had been acquired with Digital) for a 16% stake in CMGI, which has a portfolio of 40 Web companies, and set aside $100m to boost Compaq's profile as an Internet company. Some of this money went to the Williams F1 sponsorship which began this season.

Rosen, who has since stepped down, was replaced as Compaq CEO by Michael Capellas, an automobile fan who in the mid-1990s invested $24m of his own money in Rosen Motors, trying to develop a hybrid-electric car with his brother Harold, a former Hughes engineer. Rosen Motors was not a success and closed in 1997.