HPQ (Was HWP) - Hewlett Packard Merged with Compaq Computer: Who is Compaq's Michael Capellas?

» Kirk - Who is Compaq's Michael Capellas?

Sounds like a good guy:

On the corporate side, Capellas has sought to return Compaq to its engineering roots, and part of that has meant relinquishing leadership in low-margin PC sales to Dell.

Compaq's Capellas redefining his role

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Posted at 12:08 a.m. PDT Saturday, Sept. 8, 2001

Compaq's Capellas redefining his role
BY MATT MARSHALL
Mercury News
When Michael Capellas was anointed two years ago as chief executive of Compaq, then the world's No. 1 PC maker, he was a relative unknown in the world of technology. And for the most part, he's stayed that way.

The same week Capellas took over, Carly Fiorina was appointed CEO of Hewlett-Packard. And her tenure couldn't be more different than Capellas. She's starred in her own television commercial. She jets around the world to meet with employees. Television crews track every public appearance. If there's such a thing as a corporate rock star, it's Fiorina.

Last week, the two cultures of Michael Capellas and Carly Fiorina were thrown together, when Hewlett-Packard announced the acquisition of Compaq. Capellas, 46, -- the same age as Fiorina -- will take the position as president under Fiorina's leadership as CEO.

For observers of Capellas, it couldn't be a better fit. The Ohio native is a consummate executive, known for his quick decision making, comfort with technical detail and open management style.

``Michael knows his role,'' said Steve Allen, analyst with Hotovec, Pomeranz & Co., an investment bank in San Francisco. ``He'll be running the business and making the internal decisions. He doesn't have a desire to be in the spotlight as much as Carly does. She'll be the external one, with the photo op's, and dinner with the Bushes.''

Being No. 2, however, won't come naturally to Capellas.

From the beginning, he acknowledged in an interview late last week, he has always sought the toughest job. As an eighth-grader, his coach told him he couldn't play linebacker on his school football team because he wasn't tough enough. Capellas wasn't a natural athlete, and is blind in one eye. He was placed on the no-glory offensive line.

Capellas went into a workout frenzy to prove his coach wrong. He soon emerged not only as a linebacker, but co-captain of the high-school football team and state all-star in 1971. It's that drive that has sent him swiftly upward through the corporate ranks to lead one of the biggest technology companies in the country -- he has held 22 different jobs at six companies.

So why is he settling for No. 2?

After the merger announcement, he said, analysts began questioning whether he would stay at HP.

``In the position of president, I have the responsibility over line operations. That is where I can make a huge contribution,'' Capellas said. ``I believe I'm strong in understanding technologies and in hands-on execution. That may sound noble, and simplistic, but it's the truth. That's where I can make the most contribution.

``Am I going to stay?,'' he said, supplying the next question. ``Absolutely. I have a huge emotional contract to not only the company, but the people.''

Capellas graduated in 1976 with a bachelor's degree in business administration from Kent State University in Ohio.

He spent the bulk of his career in low-tech ``Old Economy'' industries. He got his start at steelmaker Republic Steel in 1976, where spent five years. Then he worked for oil-field services giant Schlumberger for 15 years. He then switched to high-tech, first as director of supply chain management at SAP America, and then as a senior vice president at Oracle, where he refocused the company's global sales force.

Capellas joined Compaq in 1998 as a chief information officer. He then took over as CEO in July 1999, after his predecessor, the secretive Eckhard Pfeiffer, was kicked out. It was a turbulent time. Pfeiffer bought two large companies, Tandem Computers, in 1997, and Digital Equipment in 1998, but he botched the integration of their various businesses into Compaq. Chairman and long-time venture capitalist Ben Rosen stepped in, and replaced Pfeiffer with Capellas. In the PC market, Compaq -- which sold machines through retailers -- was getting killed by Dell Computer's lower-cost direct sales strategy.

Capellas was forced to clean up from the beginning: Less than a week after taking over, Capellas had to report one of the company's worst quarters ever: a loss of $184 million.

Capellas said he hasn't looked back. He slashed costs, and pushed Compaq toward higher-margin areas such as direct sales, wireless computing, and cutting non-core products like routers and chips. He also dropped the company's stifling dress code, and pushed for a more open corporate culture. He submitted Compaq's strategy formulation to a companywide debate, and started weekly staff meetings in which different views were listened to: ``He listens carefully to his staff,'' says Compaq's chief technology officer, Shane Robison. ``He's very team oriented.''

Capellas is known to have fun, too. He often has music blaring from his office and plays music such as Cher's ``Believe'' before quarterly conference calls.

He also can be whimsical. How he handled his first telephone conference with Wall Street analysts has become the stuff of legend.

Before the call, he noticed the dark mood among his colleagues gathered in a conference room. Worried that the analysts would notice, he rushed out to his office and came back with a CD player. He cranked up the volume, and with the tunes of the Spencer David Group's ``Gimme Some Lovin'' blaring, he grabbed Alice McGuire, head of investor relations, and together, they spun around the room. He stopped seconds before the conference call, by which time his underlings were giggling and shaken up.

Capellas also loves gadgetry. He relishes showing off his favorite Compaq toys, for example the handheld iPAQ Pocket PC -- on which he has his calendar, travel schedule, e-mail, and of course, his favorite rock music. His hobbies include football, golf, guitar and marathon running. He says he likes to think through problems while running in a park near his house in uptown Houston.

On the corporate side, Capellas has sought to return Compaq to its engineering roots, and part of that has meant relinquishing leadership in low-margin PC sales to Dell.

While acknowledging his dynamic leadership, some critics say Capellas has lacked coherent vision for how to tackle the Internet age. Others say that criticism is unfair, given the legacy problems he faced.

``Compaq has been struggling with the question: `What are we?,' '' says Allen. ``As recently as a few months ago, they redefined themselves as a services company.''

Indeed, Capellas has appeared obsessed with going after the market of business services giant International Business Machines.

In a conversation with a Scottish newspaper in February, he spoke of ``huge parallels'' between the two companies, even referring to them as the two ``Himalayas.'' Another sign of his obsession was his decision not to fully enter the PC price war with rival Dell, and go after IBM's business services market instead. Fiorina has a similar liking for the services business, and the merger was partly designed to realize that goal.

Capellas will stay in Houston until the deal goes through (Antitrust authorities typically take about six months to approve such deals).

After that, he'll be coming to Palo Alto.

``Michael's going to be running the business,'' said Robison. ``That's where the headquarters is going to be. . . . I think he's looking forward to it.''

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Contact Matt Marshall at mmarshall@sjmercury.com or (408)920-5920.

-- posted by Kirk