Company Name: Compaq

Overview:
Compaq established a leadership position in PC industry by selling legal clones of IBM PC.
The main USP of the company was selling low-priced PC. However in a bid to attain
innovative edge in the market the company undertook multiple acquisitions and changes in
the strategy which led to its eventual downfall.
Reasons for Downfall:
Acquisitions:
The CEO of Compaq in 1997, Eckhard Pfeiffer, decided to increase Compaq product
portfolio. This led to a series of acquisitions which proved fatal for Compaq. The prominent
of these were the acquisition of Digital Equipment Corporation (DEC). DEC was in the
business of manufacturing chips which were not the part of main product line of Compaq.
DEC has twice the employees as Compaq while generating only half the revenue. Compaq
planned to acquire DEC’s services business which it failed to acquire and ended up acquiring
the entire business. Compaq also failed to integrate the businesses in time leading to
distraction from its business of manufacturing low end computers.
Competition:
Compaq started facing increased competition in low-end PC market from HP and Dell. This
resulted into price wars cutting Compaq’s margins.
Change in distribution strategy:
Compaq changed its distribution strategy from retail-oriented to direct channels. This led to
problems with its retail connections.
Competition Threats:
Preference:
In order to stay innovative in the business the company expanded by the route of
acquisition however failure to integrate led it to lose its focus on its PC business thus
changing the consumer preference to Dell