7. COMPAQ INDIA Beyond PC Volumes

The
Houston-based Compaq went through turmoil in 1999, as it struggled under excess
inventory and the Digital acquisition. Eckhard Pfeiffer was sacked that April,
and two months later the low-profile 44-year-old Michael Capellas took over.
Amidst red ink, Capellas announced in July 1999 a $1 billion restructuring and
8,000 layoffs.

Compaq inched back to health. It lost its top US slots in
consumer PCs and a lot of money in commercial PCs-and HP went way ahead in US
retail. But it cut costs, and picked up key executives including a senior VP of
marketing and strategy.

Compaq
India had fewer ups and downs, but it did get some stiff MNC competition. HP
nearly caught up in desktops, and IBM was ahead in portables. Compaq sold 63,700
PCs–but in the volume corporate desktop segment it did not really have a
product to take on HP Brios. Assembly at Bangalore (formerly a Digital plant)
helped, beginning with the DeskPro EP. Now, with the June 2000 Deskpro SB ‘business
computer’ launch, it finally has a volume model for SMEs–to help it double
overall PC sales to an ambitious 125,000 units.

STRATEGY

  • Ramp up office PC volumes
  • Enhance channels, service network
  • Lower costs through local assembly
  • Push DeskPro SB for SME
  • Maintain consumer desktop, portables’ growth
  • Push up AlphaServer, Intel server numbers.
PERFORMANCE HIGHLIGHTS

  • Sold 63,700 PCs
  • Shipped nearly 7,100 Intel servers, many to SMEs
  • Crossed Rs 1,000 crore in revenues
  • Sold nearly 6,800 notebooks.

Where
Compaq India has really got it right is the home market. It’s been aggressive
with its consumer desktop pricing, right from an early Cyrix-based Presario
2010, the cheapest MNC home PC then, to early last August when it dropped the
Presario 4010’s price tag to Rs 40k. It sold about 21,800 consumer PCs last
year, and is expecting healthy growth there.

Compaq inched up near IBM in portables, with a new lineup–Armada
and Aero–across a range of prices, selling nearly 6,800 notebooks. It also
announced a small data projector for mobile users, which should show up in this
fiscal’s sales.

Servers are where Compaq is trying to ramp up now. It sold
nearly 7,100 Intel servers, many to SMEs. UNIX servers were was once dominated
by Digital (now owned by Compaq), but it lost market-share to Sun, HP and IBM.
Now, it plans to fight back with the new Alphas.

  • START-UP YEAR: 1994
  • PRODUCTS AND SERVICES: Servers, workstations, PCs, notebooks
  • Employees: 700
  • ADDRESS: 92, Industrial Suburb, II Stage, Yeshawanthpur, Bangalore
    560 022
  • TEL: 3374785
  • FAX: 3374395
  • WEBSITE: www.compaq.com

Services is where Compaq clearly wants to be. With 16% of its
revenues there, it’s a significant player, as are other large systems vendors.
Compaq has pointed out that DQ did not include it in this year’s Top 20 Vol I
service or integration vendors. If we had, its service revenue would indeed
place it near the top of one or more of those lists.

Compaq picked up a number of big-ticket orders: some in the
Rs 10-crore range were HLL, DoT Dotsoft, the postal department, Maruti, BSE,
HDFC, Tata Steel, Allahabad Bank, ICICI and Caltiger.

Globally, things are beginning to look up. Capellas ended his
first year on the job well out of red ink. Compaq earned $387 million on
revenues of $10.1 billion in April-June 2000. Though growth was up only 7% from
a year ago, earnings moved from -2% to +4%. It finally managed to somewhat
streamline bulky, inefficient production and distribution.

And Compaq’s PC group broke out of the red too, earning 2%
on $3.3 billion revenues, while the enterprise division earned 14% on $3.4
billion. Consumer PCs however remained weak, with income down to under 2% on
$1.6 billion revenues. Compaq’s forecasting $10.8 billion for July-September
2000. DQ

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