Compaq Reorganizes Again

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Compaq Reorganizes Again
R. Krause - June 5, 2000

Event Summary

May 5th, 2000 - In the latest of a string of upper-level resignations, Compaq Senior Vice President Enrico Pesatori announced he was leaving the company to become CEO of start-up Synaxia Networks, located in Reading, UK. Pesatori was most recently the Group Manager of the Enterprise Solutions and Services Group.

The bigger news was what happened as a result - or was it a cause? - of the resignation. Instead of announcing a replacement for Pesatori, CEO Michael Capellas split up ESSG, promoting some groups (the Industry Standard and Business Critical Server Groups and the Storage Products Group now report directly to Capellas) and combining others in what is hoped to be a more rational sales and support organization.

After gaining a market perception of a company thrashing about, some observers had hoped the days of turmoil were behind Compaq. However, it may be that this latest reorganization will do no major harm.

Market Impact

There are two aspects to this announcement: the reorg and the resignation. We'll look at the easier one first.

When you pick up the appellation "journeyman executive", it's generally not an indicator that you're another Bill Parcells. (For those who don't follow American football: Bill Parcells is a football coach known for taking terrible-performing teams and turning them into Super Bowl contenders or champions.) After six companies in ten years, one questions how much value Pesatori adds to any given situation. It is also rumored that few persons inside Compaq (including CEO Capellas) are shedding tears over his departure. In addition, the speed with which Mr. Capellas eliminated the position indicates the value he placed on that role. At least Pesatori didn't get the "left to pursue other interests" slap.

The reorganization is tougher to call. On the one hand, turmoil is rarely good for an organization. People invariably spend more time trying to figure out where they'll land, or fighting turf wars, or just generally getting overcome by internal politics. However, if the ESSG needed leadership and Mr. Pesatori was unable to provide it, this shakeup might help the troops rally a little. We expect Compaq's competitors will try to capitalize on the opportunity, by questioning Compaq's focus/commitment/whatever and playing the FUD card. It is up to CEO Capellas and his new reports (Mary McDowell, Bill Heil, and Howard Elias), as well as VP Peter Blackmore (who now has service/support added to his current sales and marketing responsibilities) to reassure their customers that everything's going to be OK.

User Recommendations

Customers should not alter their purchasing plans as a result of the reorganization. The short-term effects seen by customers - at least on the development side - will be negligible. The movement of the service/support group creates the bigger uncertainty, especially when Compaq has suffered from a reputation for lower reliability (ref. Computerworld survey, 11/99). Although Compaq appears to be more attentive to reliability concerns these days, customers tend to remember a negative longer than Compaq would like. Customers should seek assurances from the appropriate level of Compaq management that their purchased systems will not become "orphans".

For the longer term, customers should keep an eye on the development side, to be sure that product deliveries don't start slipping. Missed schedules are good indicators that the reorganization caused more problems than it solved. If Compaq continues to deliver products and technology in a timely manner, then it will have weathered the storm well.

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