A year ago: Intel, Compaq sail in choppy seas

The mighty Intel caused tech stocks in the US to bob around like corks in the English Channel when it told the world that it would make less money in its current financial quarter than it had thought. But when Compaq, just a few days later, said it would only break even in its financial period, the whole of Wall Street went crazy, with tech companies shedding points like rejected Christmas trees shed pine needles. Since the announcements were made, only a few days ago, acres of newsprint have been devoted to the subject but, so far, little light has been shed on what problems the companies have. For Intel to say that its gross margin has been reduced from 53 per cent to 50 per cent, for example, is little more than a joke to other IT companies, which haven’t seen margins approaching anything like that since the mid-1980s. Intel has been disingenuous about the reasons for its profit warning - saying it is not entirely sure what the problems are. This, of course, is utter rubbish; as one of the most over-managed companies in the known universe, it has bean counters who are entirely clear what the problems are. If, for example, Intel was to come out and say that despite the millions of dollars it had spent on marketing, including the very silly BunnyPeople™, few people were convinced they should upgrade to the Pentium II, it would be a massive loss of face for the Great Stan. Instead, Intel, rather feebly, has pointed people in the direction of the Great Stan of Software, saying that there are not enough applications around for the people to want to shift. This, of course, flies in the face of most people’s PC experience. Running Office 97 and Internet Explorer puts a strain on all but the most powerful of machines. Increased product cycle activity and ever diminishing prices would convince your average BunnyPerson™ on the Clapham Omnibus that to move to a new PC now would fly in the face of common sense. Compaq, on the other hand, is a far more interesting case. Some of us here at The Register have wondered for some time how long Pfeiffer’s company, like Topsy, could gather on growing and growing. If Compaq’s sales people, as some have suggested, have stuffed the channel with all sorts of machines, then it is a classic mistake that has cost other PC companies badly in the past. Compaq is not a happy ship. If you count the number of senior VPs that have left Pfeiffer in the last year and a bit, you’d need more than two hands. If it is true that Eckhard Pfeiffer, according to one report last week, drew $70 million in salary and options from Compaq in 1997, then perhaps he is the difference between break-even and profit. One thing is for sure. Blaming it on the Asian crisis won’t wash and shareholders won’t tolerate anything in Compaq’s case but success and more success. Can it be too long before we hear whispers that our Man of the Year must go? ®