Updated: Pfeiffer ousted in Compaq shakeup

And CFO Earl Mason heads for the hills

Compaq CEO Eckhard Pfeiffer has fallen on his sword. He resigned today, along with CFO Earl Mason. Chairman Ben Rosen will look after the shop along with vice chairmen Frank Doyle and Robert Ted Enloe - until a new CEO comes on board. Pfeiffer's departure looks like palace coup: remember, he got the job in the first place by persuading Rosen to dismiss Compaq founder Rod Canion in 1991. Pfeiffer clearly lost the confidence of Rosen, the man who supplied the initial venture capital for Compaq and who -- it is now clear -- remains the most important man in the company. With Rosen's backing, Pfeiffer could have toughed out the recent bad press and share performance, following a spectacularly inept handling of the company's recent bad quarter. But -- and its a big but -- Rosen has been dissatisfied with Compaq's financial performance for two years, according to the Financial Times. Rosen thinks the company's strategy remains sound -- unlike in 1991 when he sacked Canion. But execution is poor. This is somewhat ironic, considering Pfeiffer was never known for the Vision Thing. Pfeiffer was promoted to the top to re-engineer Compaq as a leaner, more efficient company. Under Canion, the company had grown fat and flabby - and expected customers to pay up to three times more for Compaq PCs than from equivalent models from new competitors. Compaq is fat and flabby again -- despite Pfeiffer's much vaunted obsession with supply chain management. Too much management energy has been spent on the Digital takeover -- and the company is paying the price for its introspection. Compaq is also paying the price for its dependence on the channel. In the early eighties, this was the secret of its success. In the Internet-savvy late nineties, the channel is becoming a millstone round its neck. We expect the new CEO -- whoever he or she is -- will accelerate the transition to a direct-mainly product sales strategy. The new boss/Rosen lackey will have a tough brief to follow: "I hope never again to issue a profit warning," Rosen says. Rosen will unveil the company's Q1 results in all their gory detail on Wednesday. For last week's profit warning, Mason is also walking the plank. Although the timing could just be co-incidental. Mason is off to be a CEO in another company outside the sector, Compaq says, so he has had his escape route planned for some time. ®

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