Editing Compaq (section)

====Ouster of co-founders====
Michael S. Swavely, president of Compaq's North American division since May 1989, took a six-month sabbatical in January 1991 (which would eventually become retirement effective on July 12, 1991). [[Eckhard Pfeiffer]], then president of Compaq International, was named to succeed him. Pfeiffer also received the title of chief operating officer, with responsibility for the company's operations on a worldwide basis, so that Canion could devote more time to strategy.<ref>{{cite news |url = http://topics.nytimes.com/topics/reference/timestopics/people/p/eckhard_pfeiffer/index.html?offset=10&s=newest |newspaper = The New York Times |first = Thomas C. |last = Hayes |title = Pfeiffer |access-date = 2012-11-16 |url-access=limited }}</ref> Swavely's abrupt departure in January led to rumours of turmoil in Compaq's executive suite, including friction between Canion and Swavely, likely as Swavely's rival Pfeiffer had received the number two leadership position. Swavely's U.S. marketing organization was losing ground with only 4% growth for Compaq versus 7% in the market, likely due to short supplies of the LTE 386s from component shortages, rivals that undercut Compaq's prices by as much as 35%, and large customers who did not like Compaq's dealer-only policy.<ref name=autogenerated2>"{{cite magazine |url=http://www.businessweek.com/stories/1991-02-03/coming-to-america-compaqs-european-star |archive-url=https://archive.today/20131208000636/http://www.businessweek.com/stories/1991-02-03/coming-to-america-compaqs-european-star |url-status=dead |archive-date=December 8, 2013 |title=Coming To America: Compaq's European Star |magazine=Businessweek<!-- Bot generated title --> |url-access=subscription}}</ref> Pfeiffer became president and CEO of Compaq later that year, as a result of a boardroom coup led by board chairman [[Benjamin M. Rosen|Ben Rosen]] that forced co-founder [[Rod Canion]] to resign as president and CEO.<ref>{{cite news |url = https://www.nytimes.com/1992/04/02/business/company-news-compaq-payment-to-former-chief.html?src=pm |work = The New York Times |title = COMPANY NEWS; Compaq Payment To Former Chief |date = April 2, 1992 |url-access=limited }}</ref>

Pfeiffer had joined Compaq from [[Texas Instruments]], and established operations from scratch in both Europe and Asia. Pfeiffer was given US$20,000 to start up Compaq Europe<ref name=vcfed>{{cite web |title = Compaq Computer Corporation [Archive] - Vintage Computer Forum |url = http://www.vcfed.org/forum/archive/index.php/t-32148.html |website = www.vcfed.org |access-date = 26 July 2016 |archive-date = 18 September 2016 |archive-url = https://web.archive.org/web/20160918102625/http://www.vcfed.org/forum/archive/index.php/t-32148.html |url-status = dead }}</ref> He started up Compaq's first overseas office in Munich in 1984. By 1990, Compaq Europe was a $2 billion business and number two behind IBM in that region, and foreign sales contributed 54 percent of Compaq's revenues.<ref>{{cite news |url = https://www.nytimes.com/1992/10/25/business/sound-bytes-he-who-fielded-compaq-s-swat-team.html?src=pm |work = The New York Times |first = Peter H. |last = Lewis |title = Sound Bytes; He Who Fielded Compaq's 'SWAT Team' |date = October 25, 1992 |url-access=limited }}</ref><ref name="nytimes.com">{{cite news |url = https://www.nytimes.com/1991/10/26/business/no-headline-626391.html?ref=eckhardpfeiffer |work = The New York Times |first = Thomas C. |last = Hayes |title = No Headline |date = October 26, 1991 |url-access=limited }}</ref> Pfeiffer, while transplanting Compaq's U.S. strategy of dealer-only distribution to Europe, was more selective in signing up dealers than Compaq had been in the U. S. such that European dealers were more qualified to handle its increasingly complex products.<ref name=autogenerated2 />

During the 1980s, under Canion's direction Compaq had focused on engineering, research, and quality control, producing high-end, high-performance machines with high profit margins that allowed Compaq to continue investing in engineering and next-generation technology. This strategy was successful as Compaq was considered a trusted brand, while many other IBM clones were untrusted due to being plagued by poor reliability. However, by the end of the eighties many manufacturers had improved their quality and were able to produce inexpensive PCs with off-the-shelf components, incurring none of the R&D costs which allowed them to undercut Compaq's expensive computers.<ref name="scribd1"/> Faced with lower-cost rivals such as [[Dell]], [[AST Research]], and [[Gateway 2000]], Compaq suffered a $71 million loss for that quarter, their first loss as a company, while the stock had dropped by over two-thirds.<ref name="ReferenceA">{{cite news |url = https://www.nytimes.com/1997/06/16/business/compaq-computer-looks-back-and-sees-the-competition-gaining.html?pagewanted=print&src=pm |work = The New York Times |first = Laurence |last = Zuckerman |title = Compaq Computer Looks Back and Sees the Competition Gaining |date = June 16, 1997 |url-access=limited }}</ref><ref>{{cite news |url = https://www.nytimes.com/1991/11/06/business/compaq-computer-outlines-new-lower-cost-approach.html?src=pm |work = The New York Times |first = Lawrence M. |last = Fisher |title = Compaq Computer Outlines New Lower-Cost Approach |date = November 6, 1991 |url-access=limited }}</ref> An analyst stated that "Compaq has made a lot of tactical errors in the last year and a half. They were trend-setters, now they are lagging". Canion initially believed that the 1990s recession was responsible for Compaq's declining sales but insisted that they would recover once the economy improved, however Pfeiffer's observation of the European market noted that it was competition as rivals could match Compaq at a fraction of the cost. Under pressure from Compaq's board to control costs as staff was ballooning at their Houston headquarters despite falling U.S. sales, while the number of non-U.S. employees had stayed constant, Compaq made its first-ever layoffs (1400 employees which was 12% of its workforce) while Pfeiffer was promoted to EVP and COO.<ref name="scribd1"/>

Rosen and Canion had disagreed about how to counter the cheaper Asian PC imports, as Canion wanted Compaq to build lower cost PCs with components developed in-house in order to preserve Compaq's reputation for engineering and quality, while Rosen believed that Compaq needed to buy standard components from suppliers and reach the market faster. While Canion developed an 18-month plan to create a line of low-priced computers, Rosen sent his own Compaq engineering team to [[COMDEX]] without Canion's knowledge and discovered that a low-priced PC could be made in half the time and at lower cost than Canion's initiative.<ref name="scribd1"/><ref>{{cite web |url = http://www.entrepreneur.com/article/197620 |title = Joseph R. "Rod" Canion |publisher = Entrepreneur.com |date = 2008-10-10 |access-date = 2012-08-26 }}</ref>

Rosen initiated a 14-hour board meeting, and the directors also interviewed Pfeiffer for several hours without informing Canion. At the conclusion, the board was unanimous in picking Pfeiffer over Canion. As Canion was popular with company workers, 150 employees staged an impromptu protest with signs stating, "We love you, Rod." and taking out a newspaper ad saying "Rod, you are the wind beneath our wings. We love you."<ref name="entrepreneur1"/> Canion declined an offer to remain on Compaq's board<ref name="nytimes.com"/> and was bitter about his ouster as he did not speak to Rosen for years, although their relationship became cordial again. In 1999, Canion admitted that his ouster was justified, saying "I was burned out. I needed to leave. He [Rosen] felt I didn't have a strong sense of urgency". Two weeks after Canion's ouster, five other senior executives resigned, including remaining company founder [[Jim Harris (entrepreneur)|James Harris]] as SVP of Engineering. These departures were motivated by an enhanced severance or early retirement, as well as an imminent demotion as their functions were to be shifted to vice presidents.<ref name="businessweek.com">{{cite web |url = http://www.businessweek.com/1999/99_30/b3639001.htm |title = Ben Rosen: The Lion in Winter |publisher = Businessweek.com |date = 1999-07-26 |access-date = 2012-08-26 |url-status = dead |archive-url = https://web.archive.org/web/20110909135243/http://www.businessweek.com/1999/99_30/b3639001.htm |archive-date = 2011-09-09 }}</ref>