Ailing Compaq Fires Co-Founder Canion
In an unexpected move that left analysts and industry executives groping for words, Compaq Computer’s board fired company co-founder and Chief Executive Joseph R. (Rod) Canion late Thursday and replaced him with Executive Vice President and Chief Operating Officer Eckhard Pfeiffer.
Canion, 46, has been a fixture of the personal computer industry since founding Compaq in 1982 and quickly making it the fastest-growing company in U.S. business history and the world’s third-largest PC vendor.
Analysts said the move was an indication that the problems at Compaq--struggling in the face of an industrywide sales slump and structural changes in the PC business--were even worse than previously believed. The company’ stock fell $2.75 per share to close at $30.25 Friday in heavy trading on the New York Stock Exchange.
On Wednesday, Compaq announced that it would lay off about 1,400 people and take a $135-million charge against earnings as part of a broad reorganization that will split the company into two divisions, one for basic PCs and one for higher-powered machines. But there were no indications that Canion’s job was in danger.
Pfeiffer said Friday that his focus was now on “cost-effective execution” of the new strategy, which is designed to make Compaq machines more price-competitive.
Compaq found its niche by building IBM-compatible machines that were relatively expensive but often performed even better than those produced by IBM itself, and annual sales reached $3.6 billion in 1990. But computer buyers have recently become much less willing to pay premium prices, opting instead for low-cost IBM-compatibles from companies such as Dell Computer and AST Research.
Compaq Chairman Benjamin J. Rosen, a venture capitalist who funded Compaq in its early years, said the board believed that Pfeiffer, a 50-year-old German national who has been running day-to-day operations since earlier this year, was the better man to execute the low-cost strategy.
Analysts said Rosen was apparently dissatisfied with Canion’s slow response to changes in the industry. Indeed, in an interview last June, Canion said he did not see a need for layoffs or other fundamental changes at Compaq, even though other companies such as IBM and Apple were undergoing major overhauls.
Steve Ossad, an analyst with Montgomery Securities, said he believed that the change came because Canion was “not nimble in addressing a lot of the issues in a rapidly changing industry. He was not able or willing to take decisive steps over a long period of time.”
Canion was highly regarded as a consensus manager who surrounded himself with top-notch people and guided the company smoothly along its torrid growth path. But Stewart Alsop, editor of the PC Letter, noted that consensus management sometimes made it hard for Canion to stay in close touch with changes in the business.
Even in an industry that has grown accustomed to rapid changes, though, Canion’s ouster came as a complete shock. “Clearly the company is going through a major transition, “ said Charles Wolf, a veteran computer analyst at First Boston. “But this just boggles my mind.”
Canion could not be reached for comment.
