Eckhard Pfeiffer (born August 20, 1941 in Lauban,
Lublań, Poland]) is a businessman of German ancestry, who served as
President and CEO of
Compaq from 1991 to 1999. He was named as one
of TIME's "Cyber Elite Top 50" for 1998.
1 Personal life
2.1 Ascension to CEO
2.2 Market dominance
2.3 Management shuffle
5 External links
His father was a prisoner of war during World War II, while Pfeiffer
and his mother fled the advancing Soviet troops.
He received his MBA from Southern Methodist University, Dallas, Texas.
Compaq from Texas Instruments, and established operations
from scratch in both Europe and Asia. Pfeiffer was given $20,000 USD
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 foreign sales contributed 54 percent of Compaq's
When Michael S. Swavely retired as president of Compaq's North
American division on July 12, 1991, Pfeiffer was named to succeed him.
Pfeiffer also received the title of Chief Operating Officer.
Ascension to CEO
Pfeiffer became President and CEO of
Compaq in 1991, as a result of a
boardroom coup led by board chairman Ben Rosen that forced co-founder
Rod Canion to resign as President and CEO. Canion had allowed
competitors such as Dell Computer, AST Research, and
Gateway 2000 to
Compaq with cheaper offerings, that led to a $71 million loss
for that quarter, Compaq's first loss as a company. 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".
Rosen and Canion had disagreed about how to counter the cheaper Asian
PC imports, as Canion wanted
Compaq to build lower cost PCs in-house,
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
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. In addition, it was 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 Canion's knowledge. At the conclusion, the board was
unanimous in picking Pfeiffer over Canion.
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
[Rosen] 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 C. 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. 
Under Pfeiffer's tenure as chief executive,
Compaq entered the retail
computer market with the
Presario which 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 and Cyrix. The two price wars
resulting from Compaq's actions ultimately drove numerous competitors
from the market, such as Packard Bell, and by 1994
overtaken Apple Computer and even surpassed
I.B.M. as the top PC
manufacturer. Compaq's inventory and gross margins were better than
that of its rivals which enabled it wage the price wars.
In 1996, despite record sales and profits at Compaq, Pfeiffer
initiated a major management shakeup in the senior ranks.
Pfeiffer's vision was to move
Compaq beyond its main business of
manufacturing retail PCs and into the more lucrative business services
and solutions that IBM did well at. Earl Mason, hired from Inland
Steel effective on 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 $700 million to nearly $5 billion in one
year. Also Compaq's return on invested capital (after-tax operating
profit divided by operating assets) has doubled to 50 percent from 25
percent in that period.
Pfeiffer also made several major acquisitions. In 1997,
Tandem Computers, known for their
NonStop server line. This
acquisition instantly gave
Compaq a presence in the higher end
business computing market. In 1998,
Compaq acquired Digital Equipment
Corporation, the leading company in the previous generation of
computing during the 1970s and early 1980s. This acquisition made
Compaq, at the time, the world's second largest computer maker in the
world in terms of revenue behind I.B.M.
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 as a result of a
strategy that had the company caught in between the low end and high
end. 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 struggled to compete in the PC market with the Dell Computer
Corporation, 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, though
its acquisitions of the
Digital Equipment Corporation
Digital Equipment Corporation last year and
Tandem Computer in 1997, has tried to become a major systems company,
I.B.M. and Hewlett-Packard.
By summer 1998,
Compaq was suffering from product-quality problems.
Pfeiffer also refused to develop a potential successor, rebuffing
Rosen's suggestion to recruit a few executives to create the position
Compaq president. The board complained that Pfeiffer was too
removed from management and the troops, as he surrounded himself with
a "clique" of Chief Financial Officer Earl Mason, Senior
Vice-President John Rose, and Human Resources Chief Hans Gutsch. 
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, the directors were unanimous
in dismissing Pfeiffer. During three out of the last six quarters of
Pfeiffer's tenure, the company's revenues or earnings had missed
expectations. While rival
Dell Computer 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 "
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.
Pfeiffer received $6 million in severance pay, and received $70
million worth of stock options that vested immediately as a result of
his forced resignation. At the time of his departure, Pfeiffer held
9.5 million exercisable options valued at nearly $340 million which
vested but Pfeiffer had not yet cashed the options.
Rosen assumed the capacity of interim CEO and began "cleaning house",
as shortly afterward many of Pfeiffer's top executives resigned or
were pushed out, including John Rando, Earl Mason, and John Rose.
Rando, senior vice president and general manager of
who had been said to be the heir-apparent to Pfeiffer; his division
had performed strongly as it had sales of $1.6 billion for the first
quarter compared to $113 million in 1998, which met expectations and
was anticipated to post accelerated and profitable growth going
forward. CFO Mason, who had previously been offered the job of chief
executive of a company outside the personal computer industry,
informed Compaq's board that he accepted the offer. Rose, head
of Compaq's Enterprise Computing group, was reportedly upset that he
was not considered for the CEO vacancy; his division reportedly
accounted for one third of Compaq's revenues and likely the largest
part of its profits.
Pfeiffer's permanent replacement was Michael Capellas, who had been
serving as Compaq's CIO. Immediately after Pfeiffer's ouster, Capellas
was elevated to interim chief operating officer by Rosen, and
after several months Capellas was made President and CEO, also
assuming the title of Chairman on September 28, 2000 when Rosen
retired from the board of directors. Capellas was able to restore
some of the luster lost in the latter part of the Pfeiffer era and he
repaired the relationship with
Microsoft which had deteriorated under
his predecessor's tenure, but the company still struggled against
lower-cost competitors such as Dell who took over the top spot of PC
Compaq in 2001.
Pfeiffer was one of the founders of Accoona, an Internet search engine
provider, and has been its Chairman since December 2004.
Pfeiffer serves on the boards of several major corporations including
Ericsson, and DirecTV.
Compaq Chief Takes a New Job". The New York Times. 1 October
1999. access-date= requires url= (help)
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