Pfeiffer: Compaq's new focus is services

By ROB GUTH
IDG News Service, 03/18/99

TOKYO -- The head of Compaq yesterday said here that his company is starting on the next phase of its life, one in which a growing percentage of its revenue will come from Internet-related services.

Compaq President and CEO Eckhard Pfeiffer said that his company's acquisition of Digital is complete and that Compaq is now on track towards becoming a "$50 billion company in the year 2000." Compaq in its last fiscal quarter reported a net income of $758 million on revenue of $10.9 billion.

"A major portion of our revenue comes from services and that will grow as a percent of the overall share of Compaq," he said. Many other major computer vendors are now trying to boost their revenue from services such as World Wide Web hosting, data center management and consulting.

Compaq, which has built its fortunes on selling PCs and servers, is in the throes of expanding its offerings to better compete with more fully integrated computer vendors such as IBM. Compaq's recent acquisitions of Tandem and Digital were made in the hope of strengthening its high-end server, services and systems integration businesses.

With the acquisitions, Compaq now has 27,000 field engineers worldwide, a force that can be used to offer customers services on top of Compaq hardware, Pfeiffer said. In February, Compaq said it would gradually roll out a range of new services for building networks for small to midsize businesses as well as large enterprises.

"We have transformed the company from a PC company to a global IT leader," he said confidently.

Pfeiffer said that last year 18% of Compaq's revenue came from services while "PC products" -- PC hardware, software and services-contributed a full 34%. By contrast, IBM, a recognized leader in computer services, garners over 30% of its revenue from services.

One key part of Compaq's plan to grow that side of its business is to focus on Internet-related services and businesses, Pfeiffer said.

Specifically, the company will strengthen its service offerings to enterprises that want to set up electronic commerce Web sites. In addition, Compaq will focus on supply chain management, or systems that enable a company to analyze information drawn from all its businesses, from the supply of materials to the sale of finished goods.

Compaq will also focus its energies on its two Web sites, Compaq.com, for selling products and services, and Altavista.com, which it recently spun off into a wholly-owned subsidiary and will eventually take public, Pfeiffer said.

AltaVista is now undergoing a reconstruction phase as Compaq integrates its two other Web properties, Shopping.com and Zip2, into the site, he said. Compaq is discussing "content partnerships" that the vendor will "announce when the total AltaVista site is integrated with these other capabilities," Pfeiffer said. He did not disclose when that announcement would be made.