It’s likely that anyone who even suggested that they would challenge the dominance of the personal computer giant, International Business Machines (IBM), in 1982 would have been dismissed. However, an upstart, going by the name Compaq, did and won. At the time when Compaq started giving IBM a run for its money, it was 1% the size of IBM.
Compaq quickly rose to become an industrial giant in the PC field, making history along the way: including becoming a Fortune 500 company only 4 years after its establishment. However, try to visit Compaq.com today and you will be met by the statement: “This site can’t be reached.”
How did such a dominant force in the industry disappear and where did it disappear to? We took some time to find out.
Compaq was founded in 1982 and specialized in the development, sales, and support for computers and related services and products. Rod Canion, Bill Mutro, and Jim Harris are the three men that saw an opportunity and seized it.
The trio set out to build a portable computer that would be compatible with the software created for IBM’s PCs. One of the factors that set Compaq apart from other companies producing IBM clones was Compaq’s range of portable PCs.
Compaq’s downward spiral
Even though Compaq’s end may be attributed to its acquisition by Hewlett Packard (HP), there are several other reasons which led to the company’s descent. Its struggles began when CEO at the time, Eckhard Pfeiffer, sought to produce powerful but expensive mainframe computers. To this end, the company acquired Tandem Computers, a mainframe computer maker, for $3 billion in 1997. It then acquired Digital Equipment Corporation (DEC) in 1998 for $9.6 billion.
The DEC acquisition proved to be particularly problematic. It was seemingly a good idea; however, the companies were not a good match. For example, DEC was in the business of manufacturing computer chips, but Compaq did not have plans to continue in that line of business. DEC’s chips weren’t compatible with Compaq computers. DEC made minicomputers, a type of smaller computer with less power than Compaq’s products. The company also made UNIX systems while Compaq was focused on Intel-based systems that ran Windows NT.
In a bid to stay ahead of competitors, Pfeiffer also changed the company’s approach from retail-oriented to a strategy focused on direct marketing. These changes backfired: the acquisitions and the new strategy destroyed Compaq’s retail distributor connections. In 1999, Compaq’s sales declined. Other PC makers, such as Dell and Hewlett-Packard (HP), began to rival Compaq’s success. By 2001, Dell had become the leader in PC systems.
HP announces the controversial acquisition
In a move that shook the industry, HP acquired Compaq for $25 billion in 2002. Many shareholders were unhappy with the decision. Walter Hewlett, HP’s director and son of co-founder Bill Hewlett, said at the time that Compaq had many products which overlapped with HP’s.
Another issue was the fact that the companies’ cultures did not mesh well. HP focused on engineering and precision, while Compaq’s focus was on producing low-cost products.
The deal was also opposed because 15,000 jobs had to be cut from both companies to integrate the workforce. This was knotty due to the possibility of tension between employees who supported the merger and those who were against it.
CNET News reported that HP had written a letter to its employees and the Securities and Exchange Commission in defense of the acquisition: “And, for the first time in a very long time, IBM will have a competitor that’s strong enough, bold enough, and talented enough to take them head-on in the enterprise space.” The company’s CEO at that time, Carly Fiorina, challenged those who doubted the acquisition to watch the space.
What then happened to Compaq.com?
Soon after HP acquired Compaq, a visit to Compaq.com started returning the message that the website was no longer available, making it clear that the days of Compaq.com were over.
Many Compaq products were rebranded, taking on HP’s nameplate. HP’s new acquisition became the company’s face for its lower-end computers. However, for unclear reasons, HP discontinued the Compaq brand in 2013.
In 2015, the Newsan group announced that it had acquired the license to produce Compaq notebooks in Argentina. However, this did not result in the return of Compaq.com site. It looks like the website was killed just like many other Compaq products had been.
Looking back on the much-doubted merger
While the acquisition had a shaky start, some analysts argue that the HP-Compaq partnership ultimately helped the businesses. For instance, after the acquisition “HP started taking Dell’s approach and began selling more direct” said Tommy Wald, CEO of White Glove Technologies, a Texas-based technology and IT managed services consulting firm.
Even though the HP/Compaq merger sent jitters through the spines of many, it did not turn out to be the disaster many predicted. Although Compaq.com is no longer available in most parts of the world, the company’s initial success was unprecedented. Its smart strategy and strong products set the tone for today’s PC makers.