Compaq under pressure to revamp strategy

PC maker Compaq has set itself a 180-day deadline to completely overhaul its business model, from ailing hardware vendor to a software and solutions provider.
In a 10-page memo to staff, chief executive Michael Capellas said the company will work to increase the proportion of services-related revenue, from one-fifth to one-third, in the next six months.
Although Capellas admitted that some of the new strategy's details have yet to be worked out, he isn't wasting any time and has set aside $550m (£389m) for acquisitions to boost the company's profile in new markets.
"Our goal is to transform Compaq, and to do it over the next 180 days," he said in the memo. He also told staff the move is essential if Compaq is to curb losses and reduce operating costs.
Compaq was forced to axe 5,000 jobs in March after poor hardware sales. At the time, it vowed to cut costs by over $500m (£354m) a year.
According to the memo, the new approach should reduce annual operating costs by $800m (£566m) and save $1bn (£71m) in supply chain costs by the end of the year.
Compaq's decision to phase out its own Alpha processors in favour of Intel's Itanium chip is also part of the cost-cutting exercise and should save the company several hundred million dollars a year.
Although Capellas is now two weeks into his 180-day deadline, Compaq in Europe refused to comment on the memo, calling it "speculation".