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Compaq Computer Corporation (sometimes abbreviated to CQ prior to a 2007 rebranding) was an American information

technology company A technology company (or tech company) is an electronics-based technological company, including, for example, business relating to digital electronics, software, and internet-related services, such as e-commerce services. Details According to ''Fo ...

founded in 1982 that developed, sold, and supported computers and related products and services. Compaq produced some of the first

IBM PC compatible IBM PC compatible computers are similar to the original IBM PC, XT, and AT, all from computer giant IBM, that are able to use the same software and expansion cards. Such computers were referred to as PC clones, IBM clones or IBM PC clones. ...

computers, being the second company after

Columbia Data Products Columbia Data Products, Inc. (CDP) is a company which produced the first legally reverse-engineered IBM PC compatible, IBM PC clones. It faltered in that market after only a few years, and later reinvented itself as a Software development, softwa ...

to legally

reverse engineer Reverse engineering (also known as backwards engineering or back engineering) is a process or method through which one attempts to understand through deductive reasoning how a previously made device, process, system, or piece of software accompli ...

the

IBM Personal Computer The IBM Personal Computer (model 5150, commonly known as the IBM PC) is the first microcomputer released in the IBM PC model line and the basis for the IBM PC compatible de facto standard. Released on August 12, 1981, it was created by a team ...

. It rose to become the largest supplier of PC systems during the 1990s before being overtaken by

Dell Dell is an American based technology company. It develops, sells, repairs, and supports computers and related products and services. Dell is owned by its parent company, Dell Technologies. Dell sells personal computers (PCs), servers, data ...

in 2001. Struggling to keep up in the price wars against Dell, as well as with a risky acquisition of DEC, Compaq was acquired for US$25 billion by HP in 2002. The Compaq brand remained in use by HP for lower-end systems until 2013 when it was discontinued. Since 2013, the brand is currently licensed to third parties for use on electronics in Brazil and India. The company was formed by

Rod Canion Joseph Rodney "Rod" Canion (born January 19, 1945) is an American computer scientist and businessman who co-founded Compaq Computer Corporation in 1982 and served as its first President and CEO. Biography A native of Houston, Canion graduated fr ...

, Jim Harris, and

Bill Murto Compaq Computer Corporation (sometimes abbreviated to CQ prior to a 2007 rebranding) was an American information technology company founded in 1982 that developed, sold, and supported computers and related products and services. Compaq produced ...

, all of whom were former

Texas Instruments Texas Instruments Incorporated (TI) is an American technology company headquartered in Dallas, Texas, that designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globall ...

senior managers. Murto (SVP of sales) departed Compaq in 1987, while Canion (president and CEO) and Harris (SVP of engineering) left under a shakeup in 1991, which saw

Eckhard Pfeiffer Eckhard Pfeiffer (born August 20, 1941, in Lauban, Germany Lublań.html"_;"title="ow_ ow_Lublań,_Poland.html"_;"title="Lublań.html"_;"title="ow_Lublań">ow_Lublań,_Poland">Lublań.html"_;"title="ow_Lub_...

_appointed_president_and_CEO._Pfeiffer_served_through_the_1990s._Benjamin_M._Rosen.html" ;"title="w_Lublań,_Poland.html"_;"title="Lublań">ow_Lublań,_Poland.html"_;"title="Lublań.html"_;"title="ow_Lublań">ow_Lublań,_Poland">Lublań.html"_;"title="ow_Lub ...

appointed president and CEO. Pfeiffer served through the 1990s. Benjamin M. Rosen">Ben Rosen provided the venture capital financing for the fledgling company and served as chairman of the board for 17 years from 1983 until September 28, 2000, when he retired and was succeeded by

Michael Capellas Michael David Capellas (born August 19, 1954) is an American executive in the computer and telecommunication industries. Capellas served as chairman and CEO of First Data Corporation, acting CEO of Serena Software, chairman and CEO of Compaq Comp ...

, who served as the last chairman and CEO until its merger with HP. Prior to its merger, the company was headquartered in northwest

unincorporated Unincorporated may refer to: * Unincorporated area, land not governed by a local municipality * Unincorporated entity, a type of organization * Unincorporated territories of the United States, territories under U.S. jurisdiction, to which Congress ...

Harris County, Texas Harris County is a county located in the U.S. state of Texas; as of the 2020 census, the population was 4,731,145, making it the most populous county in Texas and the third most populous county in the United States. Its county seat is Houston, ...

, which now continues as HP's largest United States facility.

History

Founding

Compaq was founded in February 1982 by

, Jim Harris, and

, three senior managers from semiconductor manufacturer

. The three of them had left due to lack of faith and loss of confidence in TI's management, and initially considered but ultimately decided against starting a chain of Mexican restaurants. Each invested $1,000 to form the company, which was founded with the temporary name Gateway Technology. The name "COMPAQ" was said to be derived from "Compatibility and Quality" but this explanation was an afterthought. The name was chosen from many suggested by

Ogilvy & Mather Ogilvy is a New York City-based British advertising, marketing, and public relations agency. It was founded in 1850 by Edmund Mather as a London-based agency. In 1964, the firm became known as Ogilvy & Mather after merging with a New York City a ...

, it being the name least rejected. The first Compaq PC was sketched out on a placemat by Ted Papajohn while dining with the founders in a pie shop, (named

House of Pies The Original House of Pies is an American restaurant chain, started c. 1969 by Al Lapin Jr., an early franchise system designer and founder of International Industries Inc. who was also responsible for International House of Pancakes, Copper Pe ...

in Houston). Their first venture capital came from

Benjamin M. Rosen Benjamin "Ben" M. Rosen (born March 11, 1933) is the former chairman and former acting chief executive officer of Compaq and a co-founder of Sevin Rosen Funds. Early life Rosen was born to a Jewish family in New Orleans, Louisiana on March 11, ...

and

Sevin Rosen Funds Sevin Rosen Funds (SRF) is a Texas-based venture capital firm credited with pioneering the personal computing revolution in the 1980s and also venture investing in Dallas. It was established in 1981 by L. J. Sevin, a former Texas Instruments eng ...

, who helped the fledgling company secure to produce their initial computer.
/ref> Overall, the founders managed to raise $25 million from venture capitalists, as this gave stability to the new company as well as providing assurances to the dealers or middlemen. Unlike many startups, Compaq differentiated its offerings from the many other

IBM PC clone IBM PC compatible computers are similar to the original IBM PC, XT, and AT, all from computer giant IBM, that are able to use the same software and expansion cards. Such computers were referred to as PC clones, IBM clones or IBM PC clones. ...

s by not focusing mainly on price, but instead concentrating on new features, such as portability and better graphics displays as well as performance—and all at prices comparable to those of IBM's PCs. In contrast to Dell and

Gateway 2000 Gateway, Inc., previously Gateway 2000, is an American computer hardware company. The company developed, manufactured, supported, and marketed a wide range of personal computers, computer monitors, servers, and computer accessories. It was acq ...

, Compaq hired veteran engineers with an average of 15 years experience, which lent credibility to Compaq's reputation of reliability among customers. Due to its partnership with

Intel Intel Corporation is an American multinational corporation and technology company headquartered in Santa Clara, California. It is the world's largest semiconductor chip manufacturer by revenue, and is one of the developers of the x86 seri ...

, Compaq was able to maintain a technological lead in the market place as it was the first one to come out with computers containing the next generation of each

Intel processor This generational list of Intel processors attempts to present all of Intel's processors from the pioneering 4-bit 4004 (1971) to the present high-end offerings. Concise technical data is given for each product. Latest 13th generation Co ...

. Under Canion's direction, Compaq sold computers only through dealers to avoid potential competition that a direct sales channel would foster, which helped foster loyalty among resellers. By giving dealers considerable leeway in pricing Compaq's offerings, either a significant markup for more profits or discount for more sales, dealers had a major incentive to advertise Compaq. During its first year of sales (second year of operation), the company sold 53,000 PCs for sales of , the first start-up to hit the mark that fast. Compaq went public in 1983 on the NYSE and raised . In 1986, it enjoyed record sales of from 150,000 PCs, and became the youngest-ever firm to make the

Fortune 500 The ''Fortune'' 500 is an annual list compiled and published by ''Fortune'' magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. The list includes publicly held companies, along ...

. In 1987, Compaq hit the revenue mark, taking the least amount of time to reach that milestone. By 1991, Compaq held the fifth place spot in the PC market with in sales that year. In 1985, sales reached $504 million. Two key marketing executives in Compaq's early years, Jim D'Arezzo and Sparky Sparks, had come from IBM's PC Group. Other key executives responsible for the company's meteoric growth in the late 1980s and early 1990s were Ross A. Cooley, another former IBM associate, who served for many years as SVP of GM North America; Michael Swavely, who was the company's chief marketing officer in the early years, and eventually ran the North America organization, later passing along that responsibility to Cooley when Swavely retired. In the United States, Brendan A. "Mac" McLoughlin (another long time IBM executive) led the company's field sales organization after starting up the Western U.S. Area of Operations. These executives, along with other key contributors, including Kevin Ellington, Douglas Johns, Steven Flannigan, and Gary Stimac, helped the company compete against the IBM Corporation in all personal computer sales categories, after many predicted that none could compete with the behemoth. The soft-spoken Canion was popular with employees and the culture that he built helped Compaq to attract the best talent. Instead of headquartering the company in a downtown Houston skyscraper, Canion chose a West Coast-style campus surrounded by forests, where every employee had similar offices and no-one (not even the CEO) had a reserved parking spot. At semi-annual meetings, turnout was high as any employee could ask questions to senior managers. In 1987, company co-founder Bill Murto resigned to study at a religious education program at the University of St. Thomas. Murto had helped to organize the company's marketing and authorized-dealer distribution strategy, and held the post of senior vice president of sales since June 1985. Murto was succeeded by Ross A. Cooley, director of corporate sales. Cooley would report to Michael S. Swavely, vice president for marketing, who was given increased responsibility and the title of vice president for sales and marketing.

Introduction of Compaq Portable

In November 1982, Compaq announced their first product, the

Compaq Portable The Compaq Portable was an early portable computer which was one of the first IBM PC compatible systems. It was Compaq Computer Corporation's first product, to be followed by others in the Compaq Portable series and later Compaq Deskpro series. ...

, a portable

personal computer A personal computer (PC) is a multi-purpose microcomputer whose size, capabilities, and price make it feasible for individual use. Personal computers are intended to be operated directly by an end user, rather than by a computer expert or tec ...

. It was released in March 1983 at . The Compaq Portable was one of the progenitors of today's

laptop A laptop, laptop computer, or notebook computer is a small, portable personal computer (PC) with a screen and alphanumeric keyboard. Laptops typically have a clam shell form factor with the screen mounted on the inside of the upper li ...

; some called it a "suitcase computer" for its size and the look of its case. It was the second IBM PC compatible, being capable of running all software that would run on an

IBM PC The IBM Personal Computer (model 5150, commonly known as the IBM PC) is the first microcomputer released in the IBM PC model line and the basis for the IBM PC compatible de facto standard. Released on August 12, 1981, it was created by a team ...

. It was a commercial success, selling 53,000 units in its first year and generating in sales revenue. The Compaq Portable was the first in the range of the

Compaq Portable series Compaq's first computers' form factors were portable, also called "luggables", and then "lunchbox computers", and together constituted the Compaq Portable series. These computers measured approximately deep, tall, and approximately wide. As th ...

. Compaq was able to market a legal IBM clone because IBM mostly used "off the shelf" parts for their PC. Furthermore,

Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...

had kept the right to license

MS-DOS MS-DOS ( ; acronym for Microsoft Disk Operating System, also known as Microsoft DOS) is an operating system for x86-based personal computers mostly developed by Microsoft. Collectively, MS-DOS, its rebranding as IBM PC DOS, and a few ope ...

, the most popular and de facto standard operating system for the IBM PC, to other computer manufacturers. The only part which had to be duplicated was the

BIOS In computing, BIOS (, ; Basic Input/Output System, also known as the System BIOS, ROM BIOS, BIOS ROM or PC BIOS) is firmware used to provide runtime services for operating systems and programs and to perform hardware initialization during the ...

, which Compaq did legally by using

clean room design Clean-room design (also known as the Chinese wall technique) is the method of copying a design by reverse engineering and then recreating it without infringing any of the copyrights associated with the original design. Clean-room design is usefu ...

at a cost of . Unlike other companies, Compaq did not bundle application software with its computers. Vice President of Sales and Service H. L. Sparks said in early 1984: Compaq instead emphasized PC compatibility, of which Future Computing in May 1983 ranked Compaq as among the "Best" examples. "Many industry observers think ompaqis poised for meteoric growth", ''

The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...

'' reported in March of that year. By October, when the company announced the Compaq Plus with a hard drive, ''

PC Magazine ''PC Magazine'' (shortened as ''PCMag'') is an American computer magazine published by Ziff Davis. A print edition was published from 1982 to January 2009. Publication of online editions started in late 1994 and have continued to the present d ...

'' wrote of "the reputation for compatibility it built with its highly regarded floppy disk portable". Compaq computers remained the most compatible PC clones into 1984, and maintained its reputation for compatibility for years, even as clone BIOSes became available from

Phoenix Technologies Phoenix Technologies Ltd is an American company that designs, develops and supports core system software for personal computers and other computing devices. The company's products commonly referred to as BIOS (Basic Input/Output System) or fir ...

and other companies that also reverse engineered IBM's design, then sold their version to clone manufacturers.

Compaq Deskpro

On June 28, 1984, Compaq released the

Compaq Deskpro The Compaq Deskpro is a line of business-oriented personal computers manufactured by Compaq, then discontinued after the merger with Hewlett-Packard. Models were produced containing microprocessors from the 8086 up to the x86-based Intel Pentiu ...

, a 16-bit desktop computer using an

Intel 8086 The 8086 (also called iAPX 86) is a 16-bit microprocessor chip designed by Intel between early 1976 and June 8, 1978, when it was released. The Intel 8088, released July 1, 1979, is a slightly modified chip with an external 8-bit data bus (allowi ...

microprocessor running at . It was considerably faster than an

and was, like the original

, also capable of running IBM software. It was Compaq's first non-portable computer and began the Deskpro line of computers.

Compaq DeskPro 386

Compaq introduced the first PC based on

's new

80386 The Intel 386, originally released as 80386 and later renamed i386, is a 32-bit microprocessor introduced in 1985. The first versions had 275,000 transistors Bill Gates William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...

of Microsoft later said The Compaq 386 computer marked the first CPU change to the PC platform that was not initiated by IBM. An IBM-made 386 machine reached the market almost a year later, but by that time Compaq was the 386 supplier of choice and IBM had lost some of its prestige. For the first three months after announcement, the Deskpro 386 shipped with Windows/386. This was a version of Windows 2.1 adapted for the 80386 processor. Support for the

virtual 8086 mode In the 80386 microprocessor and later, virtual 8086 mode (also called virtual real mode, V86-mode, or VM86) allows the execution of real mode applications that are incapable of running directly in protected mode while the processor is runnin ...

was added by Compaq engineers. (Windows, running on top of the MS-DOS operating system, would not become a popular "operating environment" until at least the release of Windows 3.0 in 1990.)

Compaq SystemPro

Compaq's technical leadership and the rivalry with IBM was emphasized when the SystemPro server was launched in late 1989 – this was a true server product with standard support for a second CPU and

RAID Raid, RAID or Raids may refer to: Attack * Raid (military), a sudden attack behind the enemy's lines without the intention of holding ground * Corporate raid, a type of hostile takeover in business * Panty raid, a prankish raid by male college ...

, but also the first product to feature the EISA bus, designed in reaction to IBM's MCA (

MicroChannel Architecture Micro Channel architecture, or the Micro Channel bus, is a proprietary 16- or 32-bit parallel computer bus introduced by IBM in 1987 which was used on PS/2 and other computers until the mid-1990s. Its name is commonly abbreviated as "MCA", altho ...

) which was incompatible with the original AT bus. Although Compaq had become successful by being 100 percent IBM-compatible, it decided to continue with the original AT bus—which it renamed ISA—instead of licensing IBM's MCA. Prior to developing EISA Compaq had invested significant resources into reverse engineering MCA, but its executives correctly calculated that the $80 billion already spent by corporations on IBM-compatible technology would make it difficult for even IBM to force manufacturers to adopt the new MCA design. Instead of cloning MCA, Compaq formed an alliance with Hewlett Packard and seven other major manufacturers, known collectively as the "

Gang of Nine The Extended Industry Standard Architecture (in practice almost always shortened to EISA and frequently pronounced "eee-suh") is a bus standard for IBM PC compatible computers. It was announced in September 1988 by a consortium of IBM PC comp ...

", to develop EISA.

1990s

By 1989, ''The New York Times'' wrote that being the first to release a 80386-based personal computer made Compaq the leader of the industry and "hurt no company more - in prestige as well as dollars - than" IBM. The company was so influential that observers and its executives spoke of "Compaq compatible". ''InfoWorld'' reported that "In the SA marketCompaq is already IBM's equal in being seen as a safe bet", quoting a

sell-side analyst A sell-side analyst works for a brokerage firm and evaluates companies for future earnings growth and other investment criteria. They sometimes place recommendations on stocks or other securities, typically phrased as "buy", "sell", or "hold." T ...

describing it as "now ''the'' safe choice in personal computers". Even rival

Tandy Corporation Tandy Corporation was an American family-owned leather goods company based in Fort Worth, Texas, United States. Tandy Leather was founded in 1919 as a leather supply store. By the end of the 1950s, under the tutelage of then-CEO Charles Tandy, ...

acknowledged Compaq's leadership, stating that within the Gang of Nine "when you have 10 people sit down before a table to write a letter to the president, someone has to write the letter. Compaq is sitting down at the typewriter".

Ouster of co-founders

Michael S. Swavely, president of Compaq's North American division since May 1989, took a six-month sabbatical in January 1991 (which would eventually become retirement effective on July 12, 1991).

,_then_president_of_Compaq_International,_was_named_to_succeed_him._Pfeiffer_also_received_the_title_of_chief_operating_officer,_with_responsibility_for_the_company's_operations_on_a_worldwide_basis,_so_that_Canion_could_devote_more_time_to_strategy._Swavely's_abrupt_departure_in_January_led_to_rumors_of_turmoil_in_Compaq's_executive_suite,_including_friction_between_Canion_and_Swavely,_likely_as_Swavely's_rival_Pfeiffer_had_received_the_number_two_leadership_position._Swavely's_U.S._marketing_organization_was_losing_ground_with_only_4%_growth_for_Compaq_versus_7%_in_the_market,_likely_due_to_short_supplies_of_the_LTE_386s_from_component_shortages,_rivals_that_undercut_Compaq's_prices_by_as_much_as_35%,_and_large_customers_who_did_not_like_Compaq's_dealer-only_policy."_Pfeiffer_became_president_and_CEO_of_Compaq_later_that_year,_as_a_result_of_a_boardroom_coup_led_by_board_chairman_Benjamin_M._Rosen.html" ;"title="w_Lublań,_Poland.html"_;"title="Lublań">ow_Lublań,_Poland.html"_;"title="Lublań.html"_;"title="ow_Lublań">ow_Lublań,_Poland">Lublań.html"_;"title="ow_Lub ...
, then president of Compaq International, was named to succeed him. Pfeiffer also received the title of chief operating officer, with responsibility for the company's operations on a worldwide basis, so that Canion could devote more time to strategy. Swavely's abrupt departure in January led to rumors of turmoil in Compaq's executive suite, including friction between Canion and Swavely, likely as Swavely's rival Pfeiffer had received the number two leadership position. Swavely's U.S. marketing organization was losing ground with only 4% growth for Compaq versus 7% in the market, likely due to short supplies of the LTE 386s from component shortages, rivals that undercut Compaq's prices by as much as 35%, and large customers who did not like Compaq's dealer-only policy." Pfeiffer became president and CEO of Compaq later that year, as a result of a boardroom coup led by board chairman Benjamin M. Rosen">Ben Rosen that forced co-founder

to resign as president and CEO. Pfeiffer had joined Compaq from

, and established operations from scratch in both Europe and Asia. Pfeiffer was given US$20,000 to start up Compaq Europe He started up Compaq's first overseas office in Munich in 1984. By 1990, Compaq Europe was a $2 billion business and number two behind IBM in that region, and foreign sales contributed 54 percent of Compaq's revenues. Pfeiffer, while transplanting Compaq's U.S. strategy of dealer-only distribution to Europe, was more selective in signing up dealers than Compaq had been in the U. S. such that European dealers were more qualified to handle its increasingly complex products. During the 1980s, under Canion's direction Compaq had focused on engineering, research, and quality control, producing high-end, high-performance machines with high profit margins that allowed Compaq to continue investing in engineering and next-generation technology. This strategy was successful as Compaq was considered a trusted brand, while many other IBM clones were untrusted due to being plagued by poor reliability. However, by the end of the eighties many manufacturers had improved their quality and were able to produce inexpensive PCs with off-the-shelf components, incurring none of the R&D costs which allowed them to undercut Compaq's expensive computers. Faced with lower-cost rivals such as

Dell Computer Dell is an American based technology company. It develops, sells, repairs, and supports computers and related products and services. Dell is owned by its parent company, Dell Technologies. Dell sells personal computers (PCs), servers, data s ...

AST Research AST Research, Inc., later doing business as AST Computer, was a personal computer manufacturer. It was founded in 1980 in Irvine, California by Albert Wong, Safi Qureshey, and Thomas Yuen, as an initialism of their first names. In the 1980s, AST ...

, and

, Compaq suffered a $71 million loss for that quarter, their first loss as a company, while the stock had dropped by over two-thirds. An analyst stated that "Compaq has made a lot of tactical errors in the last year and a half. They were trend-setters, now they are lagging". Canion initially believed that the 1990s recession was responsible for Compaq's declining sales but insisted that they would recover once the economy improved, however Pfeiffer's observation of the European market noted that it was competition as rivals could match Compaq at a fraction of the cost. Under pressure from Compaq's board to control costs as staff was ballooning at their Houston headquarters despite falling U.S. sales, while the number of non-U.S. employees had stayed constant, Compaq made its first-ever layoffs (1400 employees which was 12% of its workforce) while Pfeiffer was promoted to EVP and COO. Rosen and Canion had disagreed about how to counter the cheaper Asian PC imports, as Canion wanted Compaq to build lower cost PCs with components developed in-house in order to preserve Compaq's reputation for engineering and quality, while Rosen believed that Compaq needed to buy standard components from suppliers and reach the market faster. While Canion developed an 18-month plan to create a line of low-priced computers, Rosen sent his own Compaq engineering team to Comdex without Canion's knowledge and discovered that a low-priced PC could be made in half the time and at lower cost than Canion's initiative. It was also believed that Canion's consensus-style management slowed the company's ability to react in the market, whereas Pfeiffer's autocratic style would be suited to price and product competition. Rosen initiated a 14-hour board meeting, and the directors also interviewed Pfeiffer for several hours without informing Canion. At the conclusion, the board was unanimous in picking Pfeiffer over Canion. As Canion was popular with company workers, 150 employees staged an impromptu protest with signs stating "We love you, Rod." and taking out a newspaper ad saying "Rod, you are the wind beneath our wings. We love you." Canion declined an offer to remain on Compaq's board and was bitter about his ouster as he didn't speak to Rosen for years, although their relationship became cordial again. In 1999, Canion admitted that his ouster was justified, saying "I was burned out. I needed to leave. He

osen Osen is a municipality in Trøndelag county, Norway. It is part of the Fosen region. The administrative centre of the municipality is the village of Steinsdalen. The municipality is the 240th largest by area out of the 356 municipalities in No ...

felt I didn't have a strong sense of urgency". Two weeks after Canion's ouster, five other senior executives resigned, including remaining company founder James Harris as SVP of Engineering. These departures were motivated by an enhanced severance or early retirement, as well as an imminent demotion as their functions were to be shifted to vice presidents.

Market ascension

Under Pfeiffer's tenure as chief executive, Compaq entered the retail computer market with the

Compaq Presario Presario is a discontinued line of consumer desktop computers and notebooks originally produced by Compaq. The Presario family of computers was introduced in September 1993. In the mid-1990s, Compaq began manufacturing PC monitors as part of the ...

as one of the first manufacturers in the mid-1990s to market a sub-$1000 PC. In order to maintain the prices it wanted, Compaq became the first first-tier computer manufacturer to utilize CPUs from

AMD Advanced Micro Devices, Inc. (AMD) is an American multinational semiconductor company based in Santa Clara, California, that develops computer processors and related technologies for business and consumer markets. While it initially manufactur ...

and

Cyrix Cyrix Corporation was a microprocessor developer that was founded in 1988 in Richardson, Texas, as a specialist supplier of floating point units for 286 and 386 microprocessors. The company was founded by Tom Brightman and Jerry Rogers. In 19 ...

. The two price wars resulting from Compaq's actions ultimately drove numerous competitors from the market, such as

Packard Bell Packard Bell is a Dutch-registered computer manufacturing brand and subsidiary of Acer. Originally an American radio set manufacturer, Packard Bell Corporation, it was founded by Herbert A. Bell and Leon S. Packard in 1933. In 1986, Israeli in ...

and

. From third place in 1993, Compaq had overtaken Apple Computer and even surpassed IBM as the top PC manufacturer in 1994, as both IBM and Apple were struggling considerably during that time. Compaq's inventory and gross margins were better than that of its rivals which enabled it to wage the price wars. Compaq had decided to make a foray into printers in 1989, and the first models were released to positive reviews in 1992. However, Pfeiffer saw that the prospects of taking on market leader

Hewlett Packard The Hewlett-Packard Company, commonly shortened to Hewlett-Packard ( ) or HP, was an American multinational information technology company headquartered in Palo Alto, California. HP developed and provided a wide variety of hardware components ...

(who had 60% market share) was tough, as that would force Compaq to devote more funds and people to that project than originally budgeted. Compaq ended up selling the printer business to Xerox and took a charge of $50 million. On June 26, 1995, Compaq reached an agreement with Cisco Systems Inc. in order to get into networking, including digital modems, routers, and switches favored by small businesses and corporate departments, which was now a $4 billion business and the fastest-growing part of the computer hardware market. Compaq also built up a network engineering and marketing staff.

Management shuffle

In 1996, despite record sales and profits at Compaq, Pfeiffer initiated a major management shakeup in the senior ranks. John T. Rose, who previously ran Compaq's desktop PC division, took over the corporate server business from SVP Gary Stimac who had resigned. Rose had joined Compaq in 1993 from Digital Equipment Corporation where he oversaw the personal computer division and worldwide engineering, while Stimac had been with Compaq since 1982 and was one of the longest-serving executives. Senior Vice-president for North America Ross Cooley announced his resignation effective at the end of 1996. CFO Daryl J. White, who joined the company in January, 1983 resigned in May, 1996 after 8 years as CFO. Michael Winkler, who joined Compaq in 1995 to run its portable computer division, was promoted to general manager of the new PC products group. Earl Mason, hired from Inland Steel effective in May 1996, immediately made an impact as the new CFO. Under Mason's guidance, Compaq utilized its assets more efficiently instead of focusing just on income and profits, which increased Compaq's cash from to nearly in one year. Additionally, Compaq's return on invested capital (after-tax operating profit divided by operating assets) doubled to 50 percent from 25 percent in that period. Compaq had been producing the PC chassis at its plant in

Shenzhen, China Shenzhen (; ; ; ), also historically known as Sham Chun, is a major Sub-provincial division, sub-provincial city and one of the Special economic zones of China, special economic zones of China. The city is located on the east bank of the Pea ...

to cut costs. In 1996, instead of expanding its own plant, Compaq asked a Taiwanese supplier to set up a new factory nearby to produce the mechanicals, with the Taiwanese supplier owning the inventory until it reached Compaq in Houston. Pfeiffer also introduced a new distribution strategy, to build PCs made-to-order which would eliminate the stockpile of computers in warehouses and cut the components inventory down to two weeks, with the supply chain from supplier to dealer linked by complex software. Vice-president for Corporate Development Kenneth E. Kurtzman assembled five teams to examine Compaq's businesses and assess each unit's strategy and that of key rivals. Kurtzman's teams recommended to Pfeiffer that each business unit had to be first or second in its market within three years—or else Compaq should exit that line. Also, the company should no longer use profits from high-margin businesses to carry marginally profitable ones, as instead each unit must show a return on investment. Pfeiffer's vision was to make Compaq a full-fledged computer company, moving beyond its main business of manufacturing retail PCs and into the more lucrative business services and solutions that IBM did well at, such as computer servers which would also require more "customer handholding" from either the dealers or Compaq staff themselves. Unlike IBM and HP, Compaq would not build up field technicians and programmers in-house as those could be costly assets, instead Compaq would leverage its partnerships (including those with Andersen Consulting and software maker SAP) to install and maintain corporate systems. This allowed Compaq to compete in the "big-iron market" without incurring the costs of running its own services or software businesses. In January 1998, Compaq was at its height. CEO Pfeiffer boldly predicted that the

"Wintel" duopoly would be replaced by "Wintelpaq".

Acquisitions

Pfeiffer also made several major and some minor acquisitions. In 1997, Compaq bought

Tandem Computers Tandem Computers, Inc. was the dominant manufacturer of fault-tolerant computer systems for Automated teller machine, ATM networks, banks, stock exchanges, telephone switching centers, and other similar commercial transaction processing applicati ...

, known for their NonStop server line. This acquisition instantly gave Compaq a presence in the higher end business computing market. Minor acquisitions centered around building a networking arm and included NetWorth (1998) based in Irving, Texas and Thomas-Conrad (1998) based in Austin, Texas. In 1997

Microcom Microcom, Inc., was a major modem vendor during the 1980s, although never as popular as the "big three", Hayes, U.S. Robotics (USR) and Telebit. Nevertheless, Microcom holds an important place in modem history for introducing the MNP error-co ...

was also acquired, based in Norwood, MA, which brought a line of modems, Remote Access Servers (RAS) and the popular Carbon Copy software. In 1998, Compaq acquired

Digital Equipment Corporation Digital Equipment Corporation (DEC ), using the trademark Digital, was a major American company in the computer industry from the 1960s to the 1990s. The company was co-founded by Ken Olsen and Harlan Anderson in 1957. Olsen was president unt ...

for a then-industry record of $9.6 billion. The merger made Compaq, at the time, the world's second largest computer maker in the world in terms of revenue behind IBM. Digital Equipment, which had nearly twice as many employees as Compaq while generating half the revenue, had been a leading computer company during the 1970s and early 1980s. However, Digital had struggled during the 1990s, with high operating costs. For nine years the company had lost money or barely broke even, and had recently refocused itself as a "network solutions company". In 1995, Compaq had considered a bid for Digital but only became seriously interested in 1997 after Digital's major divestments and refocusing on the Internet. At the time of the acquisition, services accounted for 45 percent of Digital's revenues (about $6 billion) and their gross margins on services averaged 34 percent, considerably higher than Compaq's 25% margins on PC sales and also satisfying customers who had demanded more services from Compaq for years. Compaq had originally wanted to purchase only Digital's services business but that was turned down. When the announcement was made, it was initially viewed as a master stroke as it immediately gave Compaq a 22,000 person global service operation to help corporations handle major technological purchases (by 2001 services made up over 20% of Compaq's revenues, largely due to the Digital employees inherited from the merger), in order to compete with IBM. However it was also risky merger, as the combined company would have to lay off 2,000 employees from Compaq and 15,000 from Digital which would potentially hurt morale. Furthermore, Compaq fell behind schedule in integrating Digital's operations, which also distracted the company from its strength in low-end PCs where it used to lead the market in rolling out next-generation systems which let rival

grab market share. Reportedly Compaq had three consulting firms working to integrate Digital alone. However, Pfeiffer had little vision for what the combined companies should do, or indeed how the three dramatically different cultures could work as a single entity, and Compaq struggled from strategy indecisiveness and lost focus, as a result being caught in between the low end and high end of the market. Mark Anderson, president of Strategic News Service, a research firm based in Friday Harbor, Wash. was quoted as saying, "The kind of goals he had sounded good to shareholders – like being a $50 billion company by the year 2000, or to beat I.B.M. – but they didn't have anything to do with customers. The new C.E.O. should look at everything Eckhard acquired and ask: did the customer benefit from that. If the answer isn't yes, they should get rid of it." On one hand, Compaq had previously dominated the PC market with its price war but was now struggling against

, which sold directly to buyers, avoiding the dealer channel and its markup, and built each machine to order to keep inventories and costs at a minimum. At the same time, Compaq, through its acquisitions of the Digital Equipment Corporation last year and Tandem Computer in 1997, had tried to become a major systems company, like IBM and Hewlett-Packard. While IBM and HP were able generate repeat business from corporate customers to drive sales of their different divisions, Compaq had not yet managed to make its newly acquired sales and services organizations work as seamlessly.

Ouster of Pfeiffer

In early 1998, Compaq had the problem of bloated PC inventories. By summer 1998, Compaq was suffering from product-quality problems. Robert W. Stearns, SVP of Business Development, said "In feiffer'squest for bigness, he lost an understanding of the customer and built what I call empty market share--large but not profitable", while Jim Moore, a technology strategy consultant with GeoPartners Research in Cambridge, Mass., says Pfeiffer "raced to scale without having economies of scale." The "colossus" that Pfeiffer built up was not nimble enough to adapt to the fast-changing computer industry. That year Compaq forecast demand poorly and overshipped too many PCs, causing resellers to dump them at fire sale prices, and since Compaq protected resellers from heavy losses it cost them two quarters of operating profits. Pfeiffer also refused to develop a potential successor, rebuffing Rosen's suggestion to recruit a few executives to create the separate position of Compaq president. The board complained that Pfeiffer was too removed from management and the rank-and-file, as he surrounded himself with a "clique" of Chief Financial Officer Earl Mason, Senior Vice-President John T. Rose, and Senior Vice-President of Human Resources Hans Gutsch. Current and former Compaq employees complained that Gutsch was part of a group of senior executives, dubbed the "A team", who controlled access to Pfeiffer. Gutsch was said to be a "master of corporate politics, pitting senior vice presidents against each other and inserting himself into parts of the company that normally would not be under his purview". Gutsch, who oversaw security, had an extensive security system and guard station installed on the eight floor of CCA-11, where the company's senior vice presidents worked. There were accusations that Gutsch and others sought to divide top management, although this was regarded by others as sour grapes on the part of executives who were shut out of planning that involved the acquisitions of Tandem and Digital Equipment Corp. Pfeiffer reduced the size of the group working on the deal due to news leaks, saying "We cut the team down to the minimum number of people - those who would have to be directly involved, and not one person more". Robert W. Stearns, Compaq's senior vice president for business development, with responsibility for mergers and acquisitions, had opposed the acquisition of Digital as the cultural differences between both companies were too great, and complained that he was placed on the "B team" as a result. Compaq entered 1999 with strong expectations. Fourth-quarter 1998 earnings reported in January 1999 beat expectations by six cents a share with record 48 percent growth. The company launched ''Compaq.com'' as the key for its new direct sales strategy, and planned an IPO for

AltaVista AltaVista was a Web search engine established in 1995. It became one of the most-used early search engines, but lost ground to Google and was purchased by Yahoo! in 2003, which retained the brand, but based all AltaVista searches on its own sear ...

toward the end of 1999 in order to capitalize on the dotcom bubble. However, by February 1999, analysts were sceptical of Compaq's plan to sell both direct and to resellers. Compaq was hit with two class-action lawsuits, as a result of CFO Earl Mason, SVP John Rose, and other executives selling of stock before a conference call with analysts, where they noted that demand for PCs was slowing down. On April 17, 1999, just nine days after Compaq reported first-quarter profit being at half of what analysts had expected, the latest in a string of earnings disappointments, Pfeiffer was forced to resign as CEO in a coup led by board chairman Ben Rosen. Reportedly, at the special board meeting held on April 15, 1999, the directors were unanimous in dismissing Pfeiffer. The company's stock had fallen 50 percent since its all-time high in January 1999. Compaq shares, which traded as high as early in 1999, dropped 23 percent on April 12, 1999, the first day of trading after the first-quarter announcement and closed the following Friday at . During three out of the last six quarters of Pfeiffer's tenure, the company's revenues or earnings had missed expectations. While rival

had 55% growth in U.S. PC sales in the first quarter of 1999, Compaq could only manage 10%. Rosen suggested that the accelerating change brought about by the Internet had overtaken Compaq's management team, saying "As a company engaged in transforming its industry for the Internet era, we must have the organizational flexibility necessary to move at Internet speed." In a statement, Pfeiffer said "Compaq has come a long way since I joined the company in 1983" and "under Ben's guidance, I know this company will realize its potential." Rosen's priority was to have Compaq catchup as an E-commerce competitor, and he also moved to streamline operations and reduce the indecision that plagued the company. Roger Kay, an analyst at International Data Corporation, observed that Compaq's behavior at times seemed like a personal vendetta, noting that "Eckhard has been so obsessed with staying ahead of Dell that they focused too hard on market share and stopped paying attention to profitability and liquidity. They got whacked in a price war that they started." Subsequent earnings releases from Compaq's rivals, Dell, Gateway, IBM, and Hewlett-Packard suggested that the problems were not affecting the whole PC industry as Pfeiffer had suggested. Dell and Gateway sold direct, which helped them to avoid Compaq's inventory problems and compete on price without dealer markups, plus Gateway sold web access and a broad range of software tailored to small businesses. Hewlett-Packard's PC business had similar challenges like Compaq but this was offset by HP's extremely lucrative printer business, while IBM sold PCs at a loss but used them to lock in multi-year services contracts with customers. After Pfeiffer's resignation, the board established an office of the CEO with a triumvirate of directors; Rosen as interim CEO and vice chairmen Frank P. Doyle and Robert Ted Enloe III. They began "cleaning house", as shortly afterward many of Pfeiffer's top executives resigned or were pushed out, including John J. Rando, Earl L. Mason, and John T. Rose. Rando, senior vice president and general manager of Compaq Services, was a key player during the merger discussions and the most senior executive from Digital to remain with Compaq after the acquisition closed and had been touted by some as the heir-apparent to Pfeiffer. Rando's division had performed strongly as it had sales of for the first quarter compared to in 1998, which met expectations and was anticipated to post accelerated and profitable growth going forward. At the time of Rando's departure, Compaq Services ranked third behind those of IBM and EDS, while slightly ahead of

Hewlett-Packard The Hewlett-Packard Company, commonly shortened to Hewlett-Packard ( ) or HP, was an American multinational information technology company headquartered in Palo Alto, California. HP developed and provided a wide variety of hardware components ...

's and

Andersen Consulting Accenture plc is an Irish-American professional services company based in Dublin, specializing in information technology (IT) services and consulting. A ''Fortune'' Global 500 company, it reported revenues of $61.6 billion in 2022. Accentur ...

, however customers switched from Digital and Tandem technology-based workstations to those of HP, IBM, and Sun Microsystems. Mason, senior vice president and chief financial officer, had previously been offered the job of chief executive of Alliant Foodservice, Inc., a foodservice distributor based in Chicago, and he informed Compaq's board that he accepted the offer. Rose, senior vice president and general manager of Compaq's Enterprise Computing group, resigned effective as of June 3 and was succeeded by Tandem veteran Enrico Pesatori. Rose was reportedly upset that he was not considered for the CEO vacancy, which became apparent once

was named COO. While Enterprise Computing, responsible for engineering and marketing of network servers, workstations and data-storage products, reportedly accounted for one third of Compaq's revenues and likely the largest part of its profits, it was responsible for the earnings shortfall in Q1 of 1999. In addition, Rose was part of the "old guard" close to former CEO Pfeiffer, and he and other Compaq executives had been criticized at the company's annual meeting for selling stock before reporting the sales slowdown. Rose was succeeded by SVP Enrico Pesatori, who had previously worked as a senior executive at Olivetti, Zenith Data Systems, Digital Equipment Corp. and Tandem Computers. Capellas was appointed COO after pressure mounted on Rosen to find a permanent CEO, however it was reported that potential candidates did not want to work under Rosen as chairman. Around the same time Pesatori was placed in charge of the newly created Enterprise Solutions and Services Group, making him Compaq's second most powerful executive in operational responsibility after Capellas. Pfeiffer's permanent replacement was

, who had been serving as Compaq's SVP and CIO for under a year. A couple months after Pfeiffer's ouster, Capellas was elevated to interim

chief operating officer A chief operating officer or chief operations officer, also called a COO, is one of the highest-ranking executive positions in an organization, composing part of the "C-suite". The COO is usually the second-in-command at the firm, especially if t ...

on June 2, 2000, and was soon appointed president and CEO. Capellas also assumed the title of chairman on September 28, 2000, when Rosen stepped down from the board of directors. At his retirement, Rosen proclaimed "These are great achievements—to create 65,000 jobs, in sales and in market value, all starting with a sketch and a dream".

Late 1990s–2000s

In 1998, Compaq signed new sales and equipment alliance with NaviSite. Under the pact, Compaq agreed to promote and sell NaviSite Web hosting services. In return, NaviSite took Compaq as a preferred provider for its storage and

-based servers. During November 1999, Compaq began to work with

to create the first in a line of small-scale, web-based computer systems called

MSN Companion The MSN Companion was a small-scale personal computer terminal that was designed for easy access to MSN services on the Internet, such as Hotmail, while still being cheap and easy to use. They were intended for use by people with little knowledge ...

Struggles

Capellas was able to restore some of the luster lost in the latter part of the Pfeiffer era and he repaired the relationship with

which had deteriorated under his predecessor's tenure. However Compaq still struggled against lower-cost competitors with direct sales channels such as

who took over the top spot of PC manufacturer from Compaq in 2001. Compaq relied significantly on reseller channels, so their criticism caused Compaq to retreat from its proposed direct sales plan, although Capellas maintained that he would use the middlemen to provide value-added services. Despite falling to No. 2 among PC manufacturers, Capellas proclaimed "We are No. 2 in the traditional PC market, but we're focused on industry leadership in the next generation of Internet access devices and wireless mobility. That's where the growth and the profitability will be." The company's longer-term strategy involved extending its services to servers and storage products, as well as handheld computers such as the iPAQ PocketPC which accounted for 11 percent of total unit volume. Compaq struggled as a result of the collapse of the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Compo ...

, which hurt sales of their high-end systems in 2001 and 2002, and they managed only a small profit in a few quarters during these years. They also accumulated $1.7 billion in short-term debt around this time. The stock price of Compaq, which was around $25 when Capellas became CEO, was trading at half that by 2002.

Acquisition by Hewlett-Packard

In 2002, Compaq signed a merger agreement with

for , including for goodwill, where each Compaq share would be exchanged for 0.6325 of a Hewlett-Packard share. There would be a termination fee of that either company would have to pay the other to break the merger. Compaq shareholders would own 36% of the combined company while HP's would have 64%. Hewlett-Packard had reported yearly revenues of , while Compaq's was , and the combined company would have been close to IBM's revenues. It was projected to have in annual cost savings by mid-2004. The expected layoffs at Compaq and HP, 8500 and 9000 jobs respectively, would leave the combined company with a workforce of 145,000. The companies would dole out a combined in bonuses to prevent key employees from leaving if shareholders approve the proposed merger, with for HP employees and for Compaq employees. Both companies had to seek approval from their shareholders through separate special meetings. While Compaq shareholders unanimously approved the deal, there was a public proxy battle within HP as the deal was strongly opposed by numerous large HP shareholders, including the sons of the company founders, Walter Hewlett and David W. Packard, as well as the California Public Employees’ Retirement System (

CalPERS The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that "manages pension and health benefits for more than 1.5 million California public employees, retirees, and their families".CalPERSFac ...

) and the

Ontario Teachers' Pension Plan The Ontario Teachers' Pension Plan Board (french: Régime de retraite des enseignantes et des enseignants de l'Ontario) is an independent organization responsible for administering defined-benefit pensions for school teachers of the Canadian pr ...

. Walter Hewlett only reluctantly approved the merger, in his duty as a member of the board of directors, since the merger agreement "called for unanimous board approval in order to ensure the best possible shareholder reception". While supporters of the merger argued that there would be economies of scale and that the sales of PCs would drive sales of printers and cameras, Walter Hewlett was convinced that PCs were a low-margin but risky business that would not contribute and would likely dilute the old HP's traditionally profitable Imaging and Printing division. David W. Packard in his opposition to the deal " itedmassive layoffs as an example of this departure from HP’s core values... rguingthat although the founders never guaranteed job security, 'Bill and Dave never developed a premeditated business strategy that treated HP employees as expendable.'" Packard further stated that " arlyFiorina’s high-handed management and her efforts to reinvent the company ran counter to the company’s core values as established by the founders". The founders' families who controlled a significant amount of HP shares were further irked because Fiorina had made no attempt to reach out to them and consult about the merger, instead they received the same standard roadshow presentation as other investors. Analysts on Wall Street were generally critical of the merger, as both companies had been struggling before the announcement, and the stock prices of both companies dropped in the months after the merger agreement was made public. Particularly rival Dell made gains from defecting HP and Compaq customers who were wary of the merger. Carly Fiorina, initially seen as HP's savior when she was hired as CEO back in 1999, had seen the company's stock price drop to less than half since she assumed the position, and her job was said to be on shaky ground before the merger announcement. HP's offer was regarded by analysts to be overvaluing Compaq, due to Compaq's shaky financial performance in the past recent years (there were rumors that it could run out of money in 12 months and be forced to cease business operations had it stayed independent), as well as Compaq's own more conservative valuation of its assets. Detractors of the deal noted that buying Compaq was a "distraction" that would not directly help HP take on IBM's breadth or Dell Computer's direct sales model. Plus there were significant cultural differences between HP and Compaq; which made decisions by consensus and rapid autocratic styles, respectively. One of Compaq's few bright spots was its services business, which was outperforming HP's own services division. The merger was approved by HP shareholders only after the narrowest of margins, and allegations of vote buying (primarily involving an alleged last-second back-room deal with

Deutsche Bank Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...

) haunted the new company. It was subsequently disclosed that HP had retained Deutsche Bank's investment banking division in January 2002 to assist in the merger. HP had agreed to pay Deutsche Bank guaranteed, and another contingent upon approval of the merger. On August 19, 2003, the U.S. SEC charged Deutsche Bank with failing to disclose a material conflict of interest in its voting of client proxies for the merger and imposed a civil penalty of . Deutsche Bank consented without admitting or denying the findings. Compaq's pre-merger

ticker symbol A ticker symbol or stock symbol is an abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. In short, ticker symbols are arrangements of symbols or characters (generally Latin letters ...

was CPQ. This was combined with Hewlett-Packard's ticker symbol (HWP) to create the current ticker symbol (HPQ).

Post-merger

Capellas, Compaq's last chairman and CEO, became president of the post-merger Hewlett-Packard, under chairman and CEO

Carly Fiorina Cara Carleton "Carly" Fiorina ('' née'' Sneed; born September 6, 1954) is an American businesswoman and politician, known primarily for her tenure as CEO of Hewlett-Packard (HP). As chief executive officer of HP from 1999 to 2005, Fiorina wa ...

, to ease the integration of the two companies. However, Capellas was reported not to be happy with his role, being said not to be utilized and being unlikely to become CEO as the board supported Fiorina. Capellas stepped down as HP president on November 12, 2002, after just six months on the job, to become CEO of

MCI Worldcom MCI, Inc. (subsequently Worldcom and MCI WorldCom) was a telecommunications company. For a time, it was the second largest long-distance telephone company in the United States, after AT&T. Worldcom grew largely by acquiring other telecommunic ...

where he would lead its acquisition by

Verizon Verizon Communications Inc., commonly known as Verizon, is an American multinational telecommunications conglomerate and a corporate component of the Dow Jones Industrial Average. The company is headquartered at 1095 Avenue of the Americas in ...

. Capellas' former role of president was not filled as the executives who reported to him then reported directly to the CEO. Fiorina helmed the post-merger HP for nearly three years after Capellas left. HP laid off thousands of former Compaq, DEC, HP, and Tandem employees, its stock price generally declined and profits did not perk up. Several senior executives from the Compaq side including Jeff Clarke and Peter Blackmore would resign or be ousted from the post-merger HP. Though the combination of both companies' PC manufacturing capacity initially made the post-merger HP number one, it soon lost the lead and further market share to

which squeezed HP on low end PCs. HP was also unable to compete effectively with IBM in the high-end server market. In addition, the merging of the stagnant Compaq computer assembly business with HP's lucrative printing and imaging division was criticized for obstructing the profitability of the printing/imaging segment. Overall, it has been suggested that the purchase of Compaq was not a good move for HP, due to the narrow profit margins in the commoditized PC business, especially in light of IBM's 2004 announcement to sell its PC division to

Lenovo Lenovo Group Limited, often shortened to Lenovo ( , ), is a Chinese Multinational corporation, multinational technology company specializing in designing, manufacturing, and marketing consumer electronics, Personal computer, personal computers, ...

. ''The Inquirer'' noted that the continued low return on investment and small margins of HP's personal computer manufacturing business, now named the Personal Systems Group, "continues to be what it was in the individual companies, not much more than a job creation scheme for its employees". One of the few positives was Compaq's sales approach and enterprise focus that influenced the newly combined company's strategy and philosophy. In February 2005, the board of directors ousted Fiorina, with CFO

Robert Wayman Robert P. Wayman (born July 5, 1945) was the former chief financial officer (CFO) of the Hewlett-Packard Company from 1984 to 2006. He served as the company's interim CEO in 2005, and was an executive vice president, as well as a member of the H- ...

being named interim CEO. Former Compaq CEO Capellas was mentioned by some as a potential successor, but several months afterwards,

Mark Hurd Mark Vincent Hurd (January 1, 1957 – October 18, 2019) was an American technology executive who served as Co-CEO and as a member of the board of directors of Oracle Corporation. He had previously served as Chairman, Chief Executive Officer ...

was hired as president and CEO of HP. Hurd separated the PC division from the imaging and printing division and renamed it the Personal Systems Group, placing it under the leadership of EVP Todd R. Bradley. Hewlett Packard's PC business has since been reinvigorated by Hurd's restructuring and now generates more revenue than the traditionally more profitable printers. By late 2006, HP had retaken the #1 sales position of PCs from Dell, which struggled with missed estimates and poor quality, and held that rank until supplanted in the mid-2010s by

. Most Compaq products have been re-branded with the HP nameplate, such as the company's market leading ProLiant server line (now owned by

Hewlett Packard Enterprise The Hewlett Packard Enterprise Company (HPE) is an American multinational information technology company based in Spring, Texas, United States. HPE was founded on November 1, 2015, in Palo Alto, California, as part of the splitting of the H ...

, which spun off from HP in 2015), while the Compaq brand was repurposed for some of HP's consumer-oriented and budget products, notably Compaq Presario PCs. HP's business computers line was discontinued in favour of the Compaq Evo line, which was rebranded HP Compaq. HP's Jornada PDAs were replaced by Compaq iPAQ PDAs, which were renamed HP iPAQ. Following the merger, all Compaq computers were shipped with HP software. In May 2007, HP announced in a press release a new logo for their Compaq Division to be placed on the new model Compaq Presarios. In 2008, HP reshuffled its business line notebooks. The "Compaq" name from its "HP Compaq" series was originally used for all of HP's business and budget notebooks. However, the

HP EliteBook HP EliteBook is a line of business-oriented high-end notebooks and mobile workstations made by Hewlett-Packard ( HP Inc.). The EliteBook series, which fits above the lower-end ProBook series, was introduced in August 2008 as a replacement of th ...

line became the top of the business notebook lineup while the HP Compaq B series became its middle business line. As of early 2009, the "

HP ProBook The HP ProBook is a line of business-oriented laptop computers made by Hewlett-Packard (HP Inc.). HP marketed the ProBook series to business users; the list price was lower than that of HP's higher-end EliteBook series. History S-Series ( ...

" filled out HP's low end business lineup. HP Compaq 6730b

In 2009, HP sold part of Compaq's former headquarters to the

Lone Star College System Lone Star College (LSC) is a public community college system serving the northern portions of the Greater Houston, Texas, area. In 2017 it enrolled about 95,000 students. The headquarters of the Lone Star College System are located in The Wood ...

. On August 18, 2011, then-CEO of HP Leo Apotheker announced plans for a partial or full spinoff of the Personal Systems Group. The PC unit had the lowest profit margin although it accounted for nearly a third of HP's overall revenues in 2010. HP was still selling more PCs than any other vendor, shipping 14.9 million PCs in the second quarter of 2011 (17.5% of the market according to

Gartner Gartner, Inc is a technological research and consulting firm based in Stamford, Connecticut that conducts research on technology and shares this research both through private consulting as well as executive programs and conferences. Its clients ...

), while Dell and Lenovo were tied for second place, each with more than a 12% share of the market and shipments of over 10 million units. However, the announcement of the PC spinoff (concurrent with the discontinuation of WebOS, and the purchase of Autonomy Corp. for $10 billion) was poorly received by the market, and after Apotheker's ouster, plans for a divestiture were cancelled. In March 2012, the printing and imaging division was merged into the PC unit. In October 2012, according to Gartner, Lenovo took the lead as the number one PC manufacturer from HP, while IDC ranked Lenovo just right behind HP. In Q2 2013,

Forbes ''Forbes'' () is an American business magazine owned by Integrated Whale Media Investments and the Forbes family. Published eight times a year, it features articles on finance, industry, investing, and marketing topics. ''Forbes'' also re ...

reported that Lenovo ranked ahead of HP as the world's number-one PC supplier. HP discontinued the Compaq brand name in the United States in 2013. Around that same year, Globalk (a Brazilian-based retailer and licensing management firm) started a partnership with HP to re-introduce the brand with a new line of desktop and laptop computers. In 2015, Grupo Newsan (an Argentinian-based company) acquired the brand's license, along with a $3 million investment, and developed two new lines of Presario notebooks for the local market over the course of the year. However, Compaq's Argentine web site went offline in March 2019, with the last archived copy dated October 2018, featuring the same models introduced in 2016. In 2018, Ossify Industries (an Indian-based company) entered a licensing agreement with HP to use the Compaq brand name for the distribution and manufacturing of

Smart TV A smart TV, also known as a connected TV (CTV), is a traditional television set with integrated Internet and interactive Web 2.0 features, which allows users to stream music and videos, browse the internet, and view photos. Smart TVs are a techno ...

sets.

Headquarters

The Compaq World Headquarters (now HP United States) campus consisted of of land which contained 15 office buildings, 7 manufacturing buildings, a product conference center, an employee cafeteria, mechanical laboratories, warehouses, and chemical handling facilities. Instead of headquartering the company in a downtown Houston skyscraper, then-CEO Rod Canion chose a West Coast-style campus surrounded by forests, where every employee had similar offices and no-one (not even the CEO) had a reserved parking spot. As it grew, Compaq became so important to Houston that it negotiated the expansion of Highway 249 in the late 1980s, and many other technology companies appeared in what became known as the "249 Corridor". After Canion's ouster, senior vice-president of human resources, Hans W. Gutsch, oversaw the company's facilities and security. Gutsch had an extensive security system and guard station installed on the eight floor of CCA-1, where the company's senior vice presidents had their offices. Eckhard Pfeiffer, president and CEO, introduced a whole series of executive perks to a company that had always had an egalitarian culture; for instance, he oversaw the construction of an executive parking garage, previously parking places had never been reserved. On August 31, 1998, the Compaq Commons was opened in the headquarters campus, which featured a conference center, an employee convenience store, a wellness center, and an employee cafeteria. In 2009, HP sold part of Compaq's former headquarters to the

. Hewlett Packard Buildings #7 & #8, two eight-story reinforced concrete buildings totaling 450,000 square feet, plus a 1,200-car parking garage and a central chiller plant, were all deemed by the college to be too robust and costly to maintain, and so they were demolished by implosion on September 18, 2011. , the site is one of HP's largest campuses, with 7,000 employees in all six of HP's divisions. In 2018, HP announced the sale of the entire former Compaq HQ campus.

Competitors

Compaq originally competed directly against IBM, manufacturing

computer systems A computer is a machine that can be programmed to Execution (computing), carry out sequences of arithmetic or logical operations (computation) automatically. Modern digital electronic computers can perform generic sets of operations known as C ...

equivalent with the

, as well as

Apple Computer Apple Inc. is an American multinational technology company headquartered in Cupertino, California, United States. Apple is the largest technology company by revenue (totaling in 2021) and, as of June 2022, is the world's biggest company b ...

. In the 1990s, as IBM's own PC division declined, Compaq faced other IBM PC Compatible manufacturers like

, and

. By the mid-1990s, Compaq's price war had enabled it to overtake IBM and Apple, while other IBM PC Compatible manufacturers such as Packard Bell and AST were driven out from the market. Dell overtook Compaq and became the number-one supplier of PCs in 2001. At the time of their 2002 merger, Compaq and HP were the second and third largest PC manufacturers, so their combination made them number one. However, the combined HP-Compaq struggled and fell to second place behind Dell from 2003 to 2006. Due to Dell's struggles in late 2006, HP has led all PC vendors from 2007 to 2012. During its existence as a division of HP, Compaq primarily competed against other budget-oriented personal computer series from manufacturers including Acer,

, and

Toshiba , commonly known as Toshiba and stylized as TOSHIBA, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan. Its diversified products and services include power, industrial and social infrastructure system ...

. Most of Compaq's competitors except Dell were later acquired by bigger rivals like Acer (Gateway 2000 and Packard Bell) and Lenovo absorbing IBM's PC division. From 2013 onwards, Lenovo has been the world leader for PCs.

Sponsorship

Before its merger with HP, Compaq sponsored the Williams Formula One team when it was still powered by BMW engines. HP inherited and continued the sponsorship deal for a few years. Compaq sponsored

Queens Park Rangers F.C. Queens Park Rangers Football Club, commonly abbreviated to QPR, is a professional football club based in Shepherd's Bush, West London, England, which compete in the . After a nomadic early existence, they have played home matches at Loftus Ro ...

for the 1994–95 and 1995–96 seasons.

Notes

References

External links

*
Silicon Cowboys (2016) Documentary
* – How Compaq Ended IBM's PC Domination and Helped Invent Modern Computing book

{{Authority control 1982 establishments in Texas 2002 disestablishments in Texas American companies established in 1982 American companies disestablished in 2002 Computer companies established in 1982 Computer companies disestablished in 2002 Defunct companies based in Texas Defunct computer companies of the United States Defunct computer hardware companies Display technology companies Hewlett-Packard acquisitions Manufacturing companies based in Houston 2002 mergers and acquisitions Texas Instruments spinoffs

History

Founding

Introduction of Compaq Portable

Compaq Deskpro

Compaq DeskPro 386

Compaq SystemPro

1990s

Ouster of co-founders

Market ascension

Management shuffle

Acquisitions

Ouster of Pfeiffer

Late 1990s–2000s

Struggles

Acquisition by Hewlett-Packard

Post-merger

Headquarters

Competitors

Sponsorship

See also

Notes

References

External links