The Digital Dilemma

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The Digital Dilemma
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Compaq Computer

• Worlds largest PC maker
• Overtaken IBM
• Growing by 30 a year, twice the industry
  average
  
• Skyrocking share price
• Company of the year by Forbes magazine
• Exceptional CEO
• Buy Digital Equipment which had twice as many
  employees

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Consequences

• Historical loss, more than 2 billion
• Bypassed by Dell HP
• Share price ?50

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Mr. Pfeiffer

• PC industry was reaching the end of its golden
  age
  
• To a more profitable market services and
  sophisticated high-end hardware

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Interpretation

• The deal came too late
• New customer model,
• Near elimination of unsold stock (important
  during downturns)
  
• 1 value loss every week they stay in shelf
• Dell Compaq, same market capitalization, Dells
  revenue twice of Compaq
  
• Channel conflict
• 11,000 retailers
• Huge service, support and sales operations

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Digital

• In trouble
• From main frames to minicomputers
• Too fat

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Synergies

• High performance notebook
• Digital's search engine

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What went wrong

• Uncertainties
• A fragmented channel strategy, poorly executed
• Image
• Cultural difference
• Poor implementation