Compaq: a cut above the clones? (Compaq Computer Corp.; includes related article) (Personal Computers) (Cover Story)

Computer firm Compaq is cutting prices. Can it retain its quality image without compromise?

The trouble with wanting something badly is sometimes you get it. The US computer giant Compaq is ten years old this month. For much of its first decade it wanted to be like IBM. It wanted its technological nous, its power, its status as the world's biggest computer manufacturer.

Now it has drawn abreast of Big Blue in the UK personal computer market by producing high quality, reliable products that -- crucially -- did not try and lock consumers in to a proprietary IBM-style environment. But Compaq has found that although the view from the top may be exhilarating it's also very, very dangerous.

Compaq's co-founder Joseph "Rod" Canion discovered just how dangerous last October. He was ousted from his post as chief executive in a coup d'etat after third quarter results recorded Compaq's first loss.

The old order had changed. IBM was in turmoil. Prices were in free fall as "users" suddenly became hard-nosed customers who refused to be dazzled by technology. The double digit growth and high margins which had sustained the PC industry through the 80s had vanished. Compaq, a high pricer like IBM, a technological pioneer and a "job for life" employer, was perilously exposed.

Compaq's shareholders looked to Europe for their salvation. In came Eckhard Pfeiffer, head of the European division that by now made up 53% of Compaq's total income, as president and chief executive officer. …