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Compaq: All Things To All Networks?

It was in early 1992 that CEO Eckhard Pfeiffer began telling analysts of his goal for Compaq Computer Corp.: to overtake IBM as the world's No.1 supplier of PCs by 1996. Compaq breezed past Pfeiffer's goal two years early. Along the way, the Houston PC maker also stomped IBM and other old-line outfits in the server market by selling inexpensive--but highly profitable--machines to help companies control networks of desktop computers. Thanks to corporate buyers who continue to favor Compaq's PCs and servers, earnings for the second quarter, ended June 30, are expected to rise 19%, to $250 million, on a 38% sales jump, to $3.4 billion.

Heady results for sure. But to achieve Pfeiffer's new goal--grab twice the market share of Compaq's nearest rival by 2000--he must take the $11 billion giant well beyond its PC roots. So, on June 26, Pfeiffer cut a deal with Cisco Systems Inc. that leapfrogs it into the fastest-growing computer hardware market: networking. Compaq is poised to buy its way into the market and buy share once it gets there. In June, the company was outbid in its effort to acquire a computer networking company, tiny Applied Network Technologies Inc. in Westford, Mass. But don't rule out another target: Compaq won shareholder approval in May to more than triple its shares outstanding--staking it to, at current stock prices, a $34 billion acquisition kitty.