Pfeiffer: Rosen's Decision Damaged Compaq

MUNICH (02/09/2000) - The first impression may be deceptive. But in conversation with Eckhard Pfeiffer, it appears that Compaq's former top man hasn't quite gotten over being fired last April. Online auctioneer Ricardo.de's chairman of the board spoke with Computerwoche editor Jan-Bernd Meyer about the past and commented on future economic and business models shaped by the Internet.

CW: After your departure from Compaq, I am curious to know what you still want to achieve in life. Money should not matter to you anymore. What drives you now?

Pfeiffer: If you look at people who are retired, you will always notice the phenomenon of senility. The simple reason is that these people no longer participate in the current events of life. I could have withdrawn and sat at home at the computer and moved shares back and forth on my screen as a day trader. However, I did not want that. I am actually in a fantastic situation now with all my know-how and my industry contacts. Now, I only have to do what I want to.

CW: People who make it all the way to the top of their profession are said to have great enthusiasm for power. For eight years you were in a position of ultimate responsibility at Compaq and carried very much authority. Can you simply switch off the lust for power?

Pfeiffer: Of course, your personal plans depend on the stage of life you're in.

I never spoke about this topic, and understandably not at all during the time when I was still with Compaq. It leads to all kinds of complications if you give just the smallest indication that you might resign at some point.

CW: Does that mean you were already considering your exit while you were at Compaq?

Pfeiffer: I am doing now what I would have done sooner or later anyhow. It's common sense, really. The only way to perform a top job is with one hundred percent commitment. But you use yourself up doing that, and eventually, you will become conscious of this and you wonder if it all makes sense. The way I think about this should already tell you that I was not and am not concerned with power, but with a kind of life plan. Not having any power any longer is not a problem for me.

CW: When did you begin to ask yourself these questions of purpose?

Pfeiffer: I guess it began about ten, fifteen years ago when my wife asked me:

"Say, how is this supposed to continue? You're working yourself to pieces and you're going crazy." Back then, I told her that I couldn't switch gears. If you do that, you might as well resign immediately. My general goal even then was to stop at 55. But I had the thought in the back of my head that I might add a couple of years to that. So really, the events at Compaq only shortened my professional planning insignificantly.

CW: As CEO of Compaq you were considered a shining success. After you were fired, you supposedly accumulated mistake after mistake. Do these attacks hurt?

Or do you not let criticism like that touch you, especially when some of it is rather hard to comprehend?

Pfeiffer: When you start as CEO, you have to know that these things can lie in store for you. It already begins with the fact that your severance package is negotiated before you assume your office. It clearly states what to expect when you get the boot. That's why you can't say you did not know what you are getting yourself into. As chairman of the board, you have to be aware that in the final analysis, you will always be held responsible for everything.

Regardless of the circumstances.

CW: Are you reproaching yourself for possible omissions during your time at Compaq?

Pfeiffer: During the stage that led to my departure from Compaq, there were circumstances I could have avoided.

CW: The alliance with Digital Equipment, for example?

Pfeiffer: No, I won't say that the acquisition of Digital Equipment was the reason for my dismissal. After all, everybody's guess was different as to why I was let go. Chairman Ben Rosen and the other members of the supervisory board always said my strategy was good. Only the execution was lacking. Moreover, events sometimes come thick and fast. By that, I mean the short-circuit reaction of Ben Rosen which led to the decision to dismiss me.

CW: Do you believe that Rosen made a big mistake?

Pfeiffer: Rosen strongly damaged Compaq with his decision, especially as far as the company's credibility in the world is concerned. You should not forget that Compaq achieved things that were unprecedented. This goes for growth as well as market leadership as well as future strategy. Rosen always agreed with this.

But when one or two circumstances occurred that made us vulnerable to the criticism of Wall Street, Rosen simply lost it.

CW: You yourself made no mistakes?

Pfeiffer: One thing is absolutely clear: you can walk into any company in the world at any time and ask, what are your biggest problems? You'll be handed a long list. There is no point in time when anybody could claim they have no problems.

CW: You still seem rather hurt because of what happened at Compaq.

Pfeiffer: Of course I am wondering about one thing or another. For example, at a certain stage someone who was playing a double game disappointed me, and I am asking myself why.

CW: You're not saying who that somebody was?

Pfeiffer: No.

CW: Let's change the topic for a moment. You completed a comparably traditional managerial career with Telefunken, Texas Instruments and in the end as CEO of Compaq for eight years. As current chairman of the board of Ricardo, you see yourself confronted with people who are in their late twenties and who juggle a completely new model of business. What advice do you have for these "kids"?

Pfeiffer: I also wonder about that (laughs). But seriously: a company like Ricardo is obviously free to assemble its supervisory board any way it wants.

In addition, one wants to gather certain experiences in such a committee, which at the Ricardo supervisory board is reflected with Dr. Neuhaus and Walter von Szczytnicki and me.

During my career, I have had more or less all the experiences that finally matter in business life. One important insight I had is this: nothing repeats itself. That's why you cannot stick to traditions. And you must accept the new world. I can, for example, provide the experience to Ricardo that it is extremely important to precisely define the aims of a company. If this direction is lacking, a company can get on the skids very quickly. Secondly, I see my role as chairman of Ricardo more in the sense as it is understood in the U.S. There, decisions made by the executive board aren't simply agreed to habitually, as it happens again and again in Germany. In the U.S., the supervisory board represents the interest of the shareholders, and it performs this function vigorously. I bring a lot of experience to this position, some of it from my years as CEO and chairman of Compaq.

CW: Let me ask once more: which concrete pieces of advice can you give to a very young business like Ricardo or Intershop? You are on the supervisory board of both.

Pfeiffer: I can provide young management with decisive help and tips for day-to-day business. This advice might occasionally sound trite, but if you don't internalize it, you are bound to make the same mistakes over and over again. Just an example: I recommend repeatedly to sign only the best candidates -- even if it is difficult to find suitable personnel. To employ bad people out of necessity and then having to correct this decision is much worse than to search for another three months and get top people on board then.

CW: If you look at what is currently happening in the industry, one gets the feeling that all the usual doctrines about reasonable managing and serious management are being abandoned. Tiny companies have ridiculously high market value and buy up considerably bigger enterprises -- see AOL/Time Warner. Is this trend still respectable and conscionable?

Pfeiffer: Well, you see that it is possible.

CW: But if you look at a company like Akamai Technologies, which shows revenues of merely one million dollars but a market capitalization of $27 billion, you still have to wonder whether market analysts only speculate according to the principle of hope and good faith.

Pfeiffer: Akamai Technologies made enormous investments and built high-speed networks in 40 countries. Akamai has a technology that is superior to everything that came before it. Before anyone invested in this company, they assured themselves of this fact. Therefore, you can be certain even today that there will be a jump of revenues at Akamai. There are of course companies today with an incredible evaluation.

However, it is a fact that we are living in a changed world. If you would have totaled the market values of all PC companies 20 years ago, you would have come up with a very modest value. Compaq was worth a couple of hundred million dollars then. Today, Microsoft's market value alone fluctuates around $550 billion. If you had invested in eight of ten PC companies, you would be an extremely wealthy man today. And because of the Internet, everything changes considerably once more: everything happens more rapidly, everything is subject to dramatic change.

CW: Is there still anything like a comprehensible logic to these developments?

Pfeiffer: Big finance houses and large investors in particular tell themselves:

"I cannot let this Internet-based revolution pass me by. " There is a logic to these revolutions and events. If you are ready to buy into it, if you decide to believe in this logic, then you have no choice but to get on the bandwagon.

CW: You yourself speak of the faith it takes to follow this logic. But if you think calmly for a moment, aren't these current outgrowths not rather a sign of a gigantic advertising bustle, a hype that's completely out of control? Or, to put it differently, isn't the Internet business model basically a manifestation of elemental hubris?

Pfeiffer: If you look at the U.S., you will find that the Internet with its concomitants already produced effects on the whole economy. And this fact has put the USA at a considerable advantage in the global competition. That is more than mere psychology. What we are witnessing is the redistribution and reorganization of economical power that will have lasting results. Companies that invest in the new developments today will have access to the global market in the future. That's why all you can do is to wish Europe and Asia that they go in that direction with seven-league boots.

Bio: Eckhard Pfeiffer was born in 1941 in the Schlesian town of Lauban. His professional career began in 1963 at Telefunken. Only a year later, he changed from there to Texas Instruments and advanced to become the youngest marketing chief at only 33. Further milestones at TI: European head and Vice President of Corporate Marketing at TI headquarters in Dallas in 1980. He transferred to Compaq and the expansion of non-American business in 1983. Chief Operating Officer in Houston and, starting November 1991, chief executive officer until April 1999.

(Note to editors: this is a translation of an interview that was conducted in German.)

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