Coming To America: Compaq's European StarMark Ivey and Jonathan B. Levine
Things in the personal computer business sure change fast. In October, when Compaq Computer Corp. announced a laptop computer that ranked as its most important new product of 1990, Michael S. Swavely, president of North American operations, did the honors, while CEO Joseph R. "Rod" Canion and Chairman Benjamin M. Rosen sat on the sidelines.
Three months later, the new LTE 386s laptop has become so scarce that most dealers say they can't find any to sell. And Swavely, an eight-year Compaq veteran, has disappeared, too. On Jan. 21, Compaq stunned the industry--and its own employees--with the news that Swavely, 37, was retiring to his 54-acre ranch outside Houston for a six-month sabbatical. At the same time, Canion announced he had named Eckhard Pfeiffer, president of Compaq International, to the new post of chief operating officer.
'NO BAD FEELINGS.' Both the product shortages and the jarring shift are in sharp contrast to Compaq's usual composure. While competitors, including IBM, have suffered periodic shortages, Compaq has almost always kept its dealer pipeline filled. And the company has also prided itself on maintaining a smoothly meshing management team--and an image of steely control.
But Swavely's sudden departure ignited rumors about turmoil in Compaq's executive suite, including friction between Canion and Swavely. Outsiders figured that Swavely bolted when his longtime rival, Pfeiffer, got the No. 2 job. The company says that Swavely decided to step aside for personal reasons and that Pfeiffer's promotion was a natural result--not the other way around. Swavely concurs. "I wanted a break. There are no bad feelings," he told BUSINESS WEEK. Pfeiffer says both he and Canion have warned the hard-charging, chain-smoking Swavely to slow down. "Some people think of workaholism as a positive thing," says Pfeiffer. "But it can also be a negative. If you get out of balance, lots of things can go wrong."
Swavely says he has no immediate plans beyond attending to family business. "I need to look at all the options," he says. Apparently, that won't include returning to his old job at Compaq, which was eliminated in the reorganization. He says that recruiters have been calling with offers from other companies, but for now, he's not biting.
Swavely leaves at an awkward time. Compaq's U. S. marketing organization, over which he presided, is losing ground. When the company reports its yearend results on Jan. 30, analysts figure it will show only 4% growth in the U. S.--when the overall market grew 7% (chart). Short supplies of the LTE 386s, which Compaq attributes to component shortages, are partly to blame. But the company is also feeling heat from rivals that undercut its prices by as much as 35%. And Compaq's strict dealer-only strategy is wearing thin with big customers, who want to deal with the company directly--especially as they plan complex systems around Compaq's minicomputer-like Systempro. "The currents are obviously changing," says Peter J. Rogers, a Robertson, Stephens & Co. analyst.
SPECIAL RIGGING. Pfeiffer, 49, is a natural choice to mastermind a change. Under the German-born marketing guru, Compaq's European sales have boomed, soaring an estimated 50% in 1990, to about $1.8 billion. Compaq grabbed the No. 2 slot, behind IBM, in the European PC market, which grew by just 16% last year, down from 32% in 1989, says London researcher Inteco Corp.
Pfeiffer succeeded in Europe by transplanting Compaq's U. S. strategy of dealer-only distribution. But thanks to Compaq's later entry on the Continent, he was more selective in signing up dealers than Compaq had been in the U. S. As a result, more of the European dealers are qualified to handle its increasingly complex products.
Now, Pfeiffer is expected to focus on revving up U. S. distribution. He says: "It's premature to make any assumptions before I really know the U. S. dealers." But analysts expect him to pursue a new class of dealers that specialize in rigging computers for specific types of businesses. Those who know Pfeiffer warn not to expect dramatic changes. "Any risk he takes is very calculated," says Michel Motro, who worked with Pfeiffer at Texas Instruments Inc. and is currently chairman of the French operations of Metrologie, a European computer distributor. "He's not an adventurer." Just the man to assure the world that Compaq remains its cool, calm, collected self.