Compaq's CEO Resigns

tomreagan writes "Unbelievable - Compaq CEO Eckhard Pfeiffer just resigned out of the blue on Sunday and took the CFO with him. There's a story at the New York Times (CT:Requires free login) and the official press release can be be found here. "

Comments

Sign of changing paradigms

[Eric Green]

This is to all those computer companies out there that are wanting to be "the next Compaq": Don't. If you want to be "the next" anything, be "the next Dell".

Compaq's problems stemmed from the same basic flaw as Apple's problems: they engineered too much of their own hardware. That is acceptable for high-volume low-cost widgets like the $500 eMachines units, where scraping 15 cents off the cost can be millions in extra profits, but it is not acceptable in the $1K-$2K market. In that market, every Joe Consultant in Hoboken is building computers out of "white boxes" in their back room, and according to at least one survey that I saw, as much as 50% of the personal computers sold may be going through that channel.

Compaq's engineers have always laughed at Dell. They have sneered at Dell's "white boxes" (Dell does very little of their own design work, mostly re-packaging generic commodity components). Dell laughs all the way to the bank.

Apple is doomed, in the end, because they cannot compete on a cost-basis with equivalent Intel boxes. One company engineering all of their own hardware cannot compete with companies that outsource commodity hardware from specialists in that particular type of hardware. Apple cannot build a motherboard for as cheap as ABIT or some other company that specializes only in motherboards, for example.

Lessons learned:
Engineering your own hardware works only for ultra-low-cost-high-volume work, or for stuff there isn't enough volume for "generic" hardware. In the vast middle of the road, using commodity components gets you a better computer for a lower cost.

Why this is important to us:

Microsoft is like the Apple of the operating systems world. They engineer all of their own components in-house so that they can have "total control".

Linux, on the other hand, is the "white box" operating system of the new era. Linux vendors collect commodity software components from various locations, integrate them, and release the result as a single product. Much like a "white box" manufacturer looks through the available video cards to decide which one to put into his computer, the "white box" Linux vendor looks through the available 'lpd' daemons to decide which one to put in his distribution, for example. Then, like the 'white box' computer manufacturers, the 'white box' Linux vendor then differentiates himself from his competitors through a) the choice of components that he uses (e.g., glibc? libc5?), b), the kind of service he offers, c) "widget frosting", such as a nice installer, better config tool, or whatever, d) advertising and image. Part of which may be releasing software created internally as Open Source... for example, Red Hat gained much of their mind share in the early days by releasing things like 'rpm' as Open Source.

The value of this "white box" paradigm for creating operating systems is that it inevitably adds to the supply of commodity components for building operating systems, and thus will inevitably result in better operating systems components, much like having multiple video card vendors has resulted in better video cards. Bill Gates views the GNOME vs KDE thing as a weakness. I view it as a strength, much like nVidia vs. 3dfx. Just as having two 3d video card giants helps drive innovation in the 3d video card industry, having two desktop environment giants will inevitably help drive innovation in the desktop environment industry... and thus add to the supply of commodity components that we put together on a CD and call "Linux" (GNU/Linux, for you purists out there!).

-- Eric