Compaq Computer Corporation is a company founded in 1982, that develops, sells and supports computers and related products and services. Compaq produced some of the first IBM PC compatible computers, being the first company to legally reverse-engineer IBM Personal Computer. It rose to become the largest supplier of PC systems during the 1990s before being overtaken by Dell in 2001. Struggling in the aftermath of the dot-com bubble bust, Compaq was acquired for US$25 billion by HP in 2002. The Compaq brand remained used by HP for lower-end systems.

 

The company was formed by Rod Canion, Jim Harris and Bill Murto — former Texas Instruments senior managers. Murto departed Compaq in 1987, while Canion (President and CEO) and Harris (SVP of Engineering) left under a shakeup in 1991, which saw Eckhard Pfeiffer appointed President and CEO. Pfeiffer served through the 1990s. Ben Rosen provided the venture capital financing for the fledgling company and served as chairman of the board for 18 years from 1983 until September 28, 2000, when he retired and was succeeded by Michael Capellas, who served as the last Chairman and CEO until its merger with HP.

 

Prior to its takeover the company was headquartered in a facility in northwest unincorporated Harris County, Texas, United States that now serves as HP's United States headquarters.

 

History

Founding
 

 

Early Compaq logo.
 

Compaq was founded in February 1982 by Rod Canion, Jim Harris and Bill Murto, three senior managers from semiconductor manufacturer Texas Instruments. The three of them had left due to lack of faith and loss of confidence in TI's management, and initially considered but ending up decided against starting a chain of Mexican restaurants.[10][11] Each invested $1,000 to form the company, which was founded with the temporary name Gateway Technology. The name "COMPAQ" was said to be derived from "Compatibility and Quality" but this explanation was an afterthought. The name was chosen from many suggested by Ogilvy and Mather; it being the name least rejected. The first Compaq PC was sketched out on a table napkin by Ted Papajohn while dining with the founders in a Houston pie shop. Their first venture capital came from Benjamin M. Rosen and Sevin Rosen Funds who helped the fledgling company secure $1.5 million to produce their initial computer. Overall, the founders managed to raise $25 million from venture capitalists, as this gave stability to the new company as well as providing assurances to the dealers or middlemen.

 

Unlike many startups, Compaq differentiated its offerings from the many other IBM clones by not focusing mainly on price, but instead concentrating on new features, such as portability and better graphics displays as well as performance—and all at prices comparable to those of IBM’s PCs. In contrast to Dell Computer and Gateway 2000, Compaq hired veteran engineers with an average of 15 years experience, which lent credibility to Compaq's reputation of reliability among customers. Due to its partnership with Intel, Compaq was able to maintain a technological lead in the market place as it was the first one to come out with the next generation of each Intel processor. 

 

Under Canion's direction, Compaq sold computers only through dealers to avoid potential competition that a direct sales channel would foster, which helped foster loyalty among resellers. By giving dealers considerable leeway in pricing Compaq's offerings, either a significant markup for more profits or discount for more sales, dealers had a major incentive to advertise Compaq.

 

During its first year, the company sold 53,000 PCs for sales of $111 million, the first start-up to hit the $100 million mark. Compaq went public in 1983 on the NYSE and raised $67 million. In 1986, it enjoyed record sales of $329 million from 150,000 PCs, and being the youngest-ever firm to make the Fortune 500. In 1987, Compaq hit the $1 billion revenue mark, taking the least amount of time to reach that milestone. By 1991, Compaq held the fifth place spot in the PC market with $3 billion in sales that year.

 

Two key marketing executives in Compaq's early years, Jim D'Arezzo and Sparky Sparks, had come from IBM's PC Group. Other key executives responsible for the company's meteoric growth in the late 80s and early 90s were Ross A. Cooley, another former IBM associate, who served for many years as SVP of GM North America; Michael Swavely, who was the company's chief marketing officer in the early years, and eventually ran the North America organization, later passing along that responsibility to Cooley when Swavely retired. In the United States, Brendan A. "Mac" McLoughlin (another long time IBM executive) led the company's field sales organization after starting up the Western U.S. Area of Operations. These executives, along with other key contributors, including Kevin Ellington, Douglas Johns, Steven Flannigan, and Gary Stimac, helped the company with the IBM Corporation in all personal computer sales categories, after many predicted that none could compete with the behemoth.