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European Press conference RemarksEckhard PfeifferPresident & CEOCompaq laptop Corp.Oslo Press ConferenceSeptember 19. 1996
good morning, everyone. i am blissful you may live with us.
13 years ago this month, I joined Compaq with the preparatory charter of structure Compaq's business in Europe.
at the conclusion of that 12 months ... 1983 ... Compaq's global sales reached $111 million -- the maximum first-yr revenue in American business background.
speedy ahead 13 years ... and monetary analysts rate Compaq's replete year 1996 sales at $18.2 billion ... putting us among the many world's proper 200 firms.
Analyst estimates moreover demand full-year working income of $1.7 billion ... and internet income of $1.2 billion.
For the remaining decade ... now they own been making the complete world their market.
Our success as a truly world enterprise that serves more than a hundred nations ... is evidenced via their conserving the accurate worldwide laptop market participate for the final two and half years running -- 10.2%.
today, Compaq is not best the greatest business enterprise of personal computers.
We're additionally the area's fifth biggest company in computing device income ... having overtaken Hitachi and Digital device organisation in 1995.
This morning ... I wish to talk to you about:· their 1996 performance up to now ...· their outlook for the 2nd half ...· and most crucial ... their new blueprint for the future -- their roadmap for redefining Compaq and lengthening their world leadership.
Let's start with a quick appear again to the 2d quarter's solid fiscal performance.
[2 Quarter Results]
in the quarter ... global revenue grew 14 percent to $4 billion.
web revenue extended 9 % to $267 million.
And earnings per participate rose to $ .ninety six ... compared with $ .ninety suggested in the 1995 2nd quarter ... exceeding analysts' projections.
Of real magnitude in the quarter ... Compaq's flagrant margins again to 23 percent.
This became the effect of international operational improvements in the areas of logistics and asset management ... as smartly as the starting of a huge new product cycle.
Our cash equipoise accelerated 86 % over the first quarter to $1.9 billion.
This efficiency brought on a Dean Witter monetary analyst to Take a inspect at that "the basically dramatic development in its equipoise sheet puts Compaq in a category with the aid of itself in the laptop trade." Eugene Glazer, quoted in Investor's company day by day, 7/25/96
Turning to the first half ... international sales elevated 27 p.c to $eight.2 billion.
web earnings for the half rose eight percent to $501 million.
income were powerful for the half in most regions.
as an instance ...· North the us became up 39 percent ...· Europe/center East/Africa ... 14 p.c· Asia Pacific ... 24 % ...· and Latin america ... 60 percent.· [Japan = -1.7%]
Compaq continues to live the No. 1 agency of computing device PCs ... the No. 1 employer of Pentium PCs ... and the No. 1 pc server seller by artery of a wide margin.
Our inventory has answered to this carrying on with momentum.
definitely it closed ultimate Friday at a brand new checklist immoderate of $60 1/2.
['96 WW Unit Growth]
On a worldwide foundation ... the workstation market is conserving its robust expand this year.
real, they don't appear to live seeing the 20-plus % growth of years previous.
however market researchers are forecasting international unit expand of between 17 and 19 % this yr ... which interprets to shipments of about 70 million PCs.
As early as 1999 ... annual computer shipments worldwide may exceed a hundred million gadgets.
trust the elements driving this market.
The computer enterprise is fitting far more international.
Computing and communications are merging so immediately that the term of private computing is becoming the era of private communications.
On the commercial facet ... the company Pentium upgrade cycle is barely partly achieved.
And the home windows NT 4.0 cycle is just beginning. (Upgrading to NT requires a Pentium or better.)
On the buyer facet ... ongoing price ticket downs ... ease-of-use enhancements ... newly cost-efficient multimedia functionality ... and new application purposes are stimulating global demand.
[The Digital Revolution]
with out query ... the one most Big factor encouraging computing device expend is the cyber web ... which has develop into the considerable thing ferment for exploding world connectivity.
these days ... more and more americans disagree with that if you are not on the internet ... you're really out of it.
consequently, the internet is riding millions of new consumers everyone over to PCs ... and developing predominant new demand for servers and internetworking gadget.
believe about it: The web -- with its ever richer content ... transforming into inhabitants of clients ... and emerging infrastructure for commerce -- is assisting fulfill the swear of the laptop.
The internet is making every one of the tens of millions of Compaq PCs in the palms of their valued clientele more advantageous.
PCs are getting ought to-have tackle for electronic schooling ... undertaking ... and commerce.
on the identical time ... the greater consumers score "wired" ... the more necessity there's for Compaq servers and networking items and capabilities.
So where does Compaq play during this rising tide of pc demand?
Our outlook requires a tenacious second half.
definitely, they accept as accurate with we're in a superb position to gain market participate and completed help profitability for the steadiness of this 12 months.
Why attain I account this?
For starters ... they maintain the business management situation by means of several measures: market share... product breadth ... international presence ... and product cycle electricity.
consider their product life cycles ... which can live coming sooner and quicker.
[Product line: Pentiums]
since early June ... they own been rolling out a mess of fundamental new product traces that will moreover live integrated into an commercial enterprise solution.
here's a short rundown.
In early June ... they introduced a brand new classification of Pentium pro servers -- the ProLiant 5000 -- that carry midrange-equipment efficiency at half the suffuse of proprietary systems.
IDC just reported that almost eighty percent of the pc servers and superservers shipped with Pentium seasoned processors everyone through the 2nd quarter were ProLiant 5000s.
concurrently ... they brought community-based utility tackle that reduce implementation and sheperd prices.
[Product line: Portables]
Then in mid June ... they added a brand new scope of thinner, lighter-weight pc PCs that comprise sooner processors, richer multimedia, and the business's first 28.eight BPS mobile modem with advanced telephony ... everyone of which puts Compaq on the street to regaining portables management.
In mid July ... they announced the business's first family unit of home PCs that are designed for 5 different customer market segments and present five new contour factors ... together with· the first full-featured flat panel laptop domestic laptop;· the first PCs to convey arcade mighty snap shots to domestic computer systems;· and the primary mobile desktop designed for the customer market.
In late July ... they launched a complete redecorate of their all commercial computing device notebook line ... incorporating intellectual Manageability throughout the road and consolidating everyone models below a lone manufacturer name--Deskpro.
For those unfamiliar with intellectual Manageability ... it allows for clients to control, stock, and troubleshoot the laptop PCs on their network from one region.
Market research enterprise Dataquest mentioned the actual magnitude of their new Deskpros ... and wrote:
"The machines are designed for superior manufacturing logistics, which boost availability and curtail birth time for consumers ... and allows for Compaq to execute greater productive expend of its creation potential." Martin Reynolds, Dataquest, July 96
In July ... they moreover dramatically multiplied community manageability for everyone valued clientele.
We delivered Compaq Netelligent hardware and software items that execute it far more straightforward to set up, configure, and control network devices ... whereas ensuring maximum network availability and minimal can suffuse of ownership.
In August ... they announced the formation of their computing device Division ... which plans to launch a family unit of potent, trade-standard home windows NT workstations international in the fourth quarter.
These workstations will meet essentially the most worrying needs of design, engineering, and economic gurus ... at expenses a long artery diminish than proprietary UNIX/RISC workstations.
In late August ... they introduced customized service and champion choices for purchasers who are having a bet their business on the SAP R/three allotted enterprise atmosphere.
we will give probably the most coordinated carrier response and immoderate stages of availability for Compaq shoppers running mission-crucial R/three windows NT solutions on their servers.
One week in the past ... they launched the primary trade accustomed router ... rounding out their networking product line of NICs, hubs, and switches.
[Wealth Of Leadership Products]
What for those who infer from this wealth of management items and functions introduced in exactly the final three and a half months?
First, Compaq has the strongest product lineup in its heritage ... and has many new leadership items yet to advertise this 12 months.
second, in preference to readily execute products that connect clients to the information superhighway ... their new product strains will champion customers execute the bounce from connectivity to aggressive expertise within the age of the cyber web.
And third, the abilities of Compaq and their strategic partners now extends neatly past the laptop and the computer ... to the total realm of company computing and its integration with the internet.
just inquireof their valued clientele -- valued clientele fancy regularly occurring Motors ... brokerage company Smith Barney ... or UBS ... BMW ... German setaside up AG ... and a lot of, many others.
In essence, Compaq has discovered how to blend an enterprise desktop business and a purchaser electronics enterprise.
As I appear to live lower back on the primary half of the 1990s ... I perceive no longer simplest a global however moreover a quick-ahead business.
Between 1991 and the cease of 1995 ...· their worldwide market participate has grown 31 percent a 12 months compounded;· their revenue own grown 46 percent a 12 months;· their web earnings via sixty six percent a yr;· and their stock cost by essentially 50 % a yr.
All of that pointed out ... Compaq should live the primary to own that exceptional trade lies ahead for the counsel industry.
[External Market Forces]
it's not conveniently that the web is restructuring the business... inflicting competitors from a mess of industries to converge on the suggestions expertise market.
it's moreover that their consumers' necessities are altering.
further and further ...they require bundled community options and better stages of world carrier and assist.
this is why we're supplanting strategic assumptions that served us smartly within the first half of the 1990s ... with new ones attuned to the changed market realities of the second half.
this is why we're methodically choosing new competitive threats and determining how they will Take trust of them.
truly ...it live unprejudiced to talk that Compaq is launching an interior revolution in everyone places again, a revolution as a ways attaining because the one they launched in 1991.
simplest this time we're reinventing Compaq from a position of energy and notebook leadership -- not disaster.
And this time ... we've set for ourselves an even bolder management goal than the prior one among "No. 1 in '96."
we now own jumped to a aggressive enjoying container that is far broader and more intricate than the notebook business -- the international desktop industry.
[New Leadership Objective]
within this market ... they intend to live one of the precise three global computing device agencies by using the year 2000 -- networking americans and tips.
these days ... as i discussed ... they are no. 5.
Over the subsequent four years ... they are able to try to overtake at the least two of the three essential rivals automatically forward of us ... and perpetuate their legacy of increase.
we can measure ourselves in opposition t their relevant computing and communications companies that promote items and capabilities to cease consumers.
Now ... here's not a quest for bigness ... for the sake of bigness.
[Corp. Goal = Customer Satisfaction]
The raison d'être for this revolution is to achieve trade-leading client delight and loyalty in addition to miraculous lengthy-time term boom for their shareholders.
How attain they create loyal clients? with the aid of sharpening their heart of attention on customer solutions. And through staying ahead of purchasers and watching for their wants.
[New Organization Structure]
and that's the judgement why ... on July 2 ... they introduced a major new organization constitution.
We created three new customer-focused company organizations -- enterprise Computing ... workstation items ... and buyer products -- that reflect the style clients account about and expend guidance know-how.
We accept as accurate with this multiple business model will permit us to grow their core groups ... setaside money into and build new businesses ... expand their world presence ... empower determination making nearer to the market .. and champion their market heart of attention on strategic markets.
[Enterprise Computing Group]
Let's Take a quick dissect these company groups ... starting with enterprise Computing.
This company community gathers collectively:· Server items Division· enterprise Storage and alternatives Division· Their new pc Division· Their new business options Division· Their new information superhighway options Division -- which heightens their heart of attention on the information superhighway· And their Networking products Division
This company community expands their stress on enterprise computing ... positioning Compaq as an end-to-conclusion agency of computing options.
it live devoted utterly to servers, workstations, networking, and the internet ... sharpening their focus on the customer/server paradigm.
we are able to leverage their leadership server position into a protracted-term relationship with consumers ... by pulling items from across Compaq into allotted business solutions ... and with the aid of proposing valued clientele with a migration course to the web period.
Let's swirl to their next business group -- workstation items.
inside this community ... you'll discover:· Their desktop computer Division· transportable laptop Division· Their new alternate options Division, combing portables and computer alternatives· New focal point on minute and medium business options· New Communications items Division
This group will champion their corporate manner to grow and enrich the performance of their core enterprise while investing in new strategic markets.
As regards their core company ... the notebook neighborhood will no longer only sustain and grow Compaq's leadership in computer PCs .. however moreover regain management within the portables market no later than 1998.
As for investing in new markets ... the computer community will build an external communications products business in keeping with Compaq's construction of modems ... computing device playing cards ... and other wired and instant products.
at the equal time ... they are able to enhance products and solutions for minute and medium-size groups everyone over.
Our third community is buyer items.
This group turned into formalized simply over a yr ago and has been tough at labor delivering what purchasers basically necessity in a home pc..
This neighborhood is now concentrated on particular items to five key market segments of home computing device users.
Compaq will proceed to deliver consumers with new performance and simplicity ... ensuring that their PCs are very nearly as effortless to expend as home home tackle ... alluring and complementary to domestic decor ... and enabling short entry to the computing device elements consumers expend most often.
Our new enterprise agencies execute limpid that Compaq isn't any longer in one enterprise ... but in three distinct groups ... each and every with different clients ... rivals ... company fashions ... and strategic objectives.
on the equal, time these organizations are synergistic.
They improvement from the Compaq company conventional internationally for nice and reliability.
Their linkage allows for international economies of paying for, manufacturing, and distribution ... and alternatives to bundle distinctive items into cost add options.
[How Will They Measure Progress]
How will they chart their development en path to their new management purpose?
we own three separate but enormously interdependent measures.
First ... the even of customer pride they provide ... subsequently leading to trade-leading customer loyalty.
second, the economic cost add or EVA they create for their shareholders.
EVA is an excellent indicator of inventory performance ... and measures Compaq's potential to generate wealth in extra of the cost of capital they execute expend of.
Our third measure is the relative dimension of Compaq to other world laptop agencies.
We're entirely privy to the magnitude of the problem they own set for ourselves.
Yet we're equally privy to the magnitude of the merits once they succeed.
In July ... company Week wrote a narrative that comprehended the scope of their inner revolution.
The journal wrote: "If the Crossroads diagram is successful ... Compaq may own created the blueprint for the desktop enterprise of the subsequent century: an gargantuan with the nimbleness of a purchaser electronics maker and the everyone encompassing service and abet capabilities of huge computing device agencies similar to HP and IBM."
That captures the essence of what the new Compaq is about.
When individuals appear to live lower back on the influential agencies that led the manner into the subsequent millennium and into the new information age, they are completely decided that Compaq may live probably the most leaders.
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