Compaq Plans to Make Low-Cost PCs : High tech: In a complete overhaul of its operations, the computer maker plans to target entry-level buyers and considers mail-order sales.
Less than two weeks after taking office, Compaq Computer’s new chief executive on Tuesday announced a radical reorientation of the personal computer maker under which it will join the low-cost competition that has been at the root of its recent problems.
In a sweeping series of announcements, Compaq said that it was considering selling its PCs through the mail for the first time, that it would revamp its advertising to target cost-conscious buyers and that five more executives had left the company.
Eckhard Pfeiffer, named president and chief executive on Oct. 24, said the changes were designed to make the company competitive with low-end PC makers such as AST Research, Dell and Northgate.
For the mainstream market, “the kind of features we had on our products were mostly not needed and not appreciated,” Pfeiffer said. “We’re refocusing on remaining a major competitor across the board, and that means we are refocusing on . . . straightforward, entry-level products.”
Compaq Chairman Ben Rosen noted that performance and quality had traditionally been the company’s top priorities, but that the central goal now was achieving lower costs by overhauling purchasing, manufacturing and distribution.
“We’re shooting all the sacred cows,” Rosen said. In the future, Compaq machines will be as inexpensive as those of “any PC company with a name that you’ve heard of,” he added.
Rosen insisted, however, that Compaq would not abandon its commitment to its traditional corporate computer buyers, and to research and development of higher-powered PCs. “We’ll still be known as a quality supplier,” he said.
Two weeks ago, Compaq announced a $70-million third-quarter loss and the layoff of 1,440 people, and two days later company co-founder and longtime Chief Executive Joseph (Rod) Canion was ousted in favor of Chief Operating Officer Pfeiffer in a stunning boardroom coup.
The company’s stock has been falling steadily since then, but recovered slightly on Tuesday’s announcements, closing up $1.25 a share at $27.875 in heavy New York Stock Exchange trading.
Rosen confirmed Tuesday that Canion was replaced because he was unwilling to move as aggressively as Pfeiffer in implementing the low-cost strategy. Like many other companies, Compaq has been hit by a broad computer industry downturn and the sudden willingness of corporate computer buyers to purchase low-cost clones rather than brand-name products.
One industry analyst questioned Compaq’s plan to compete in the cutthroat low-end PC market, made up of hundreds of companies assembling computers in scores of low-wage nations.
“Can Compaq effectively compete in an environment that is absolutely foreign to their culture and their pricing structure? I don’t think Compaq is properly equipped to put itself in that business,” said Steve Lair, director of PC research at Dataquest Inc.
Compaq also said Tuesday that five of the Houston-based company’s 29 officers--including Jim Harris, the last of the three co-founders still with the company--had taken voluntary retirement.
