Compaq chairman steps down

Thursday, the Compaq board named Michael D. Capellas, 46, chairman to succeed Mr. Rosen, who will take the honorary title of chairman emeritus.

"Michael's appointment is a natural and appropriate step for Compaq at this moment in our history," Mr. Rosen said in a prepared statement. "I have complete confidence in Michael to lead Compaq during the next great phase of the company's growth and global expansion."

Mr. Rosen's exit is not a surprise. Analysts said it signals that he is finally satisfied that the turnaround he initiated in April 1999 by firing then-CEO Eckhard Pfeiffer is well under way.

In July, Houston-based Compaq reported its first profit in a year. The company reported second-quarter net income of $387 million, compared with a loss of $184 million in the same quarter last year.

Shares of Compaq closed up 70 cents at $29.85, but fell to $28.25 in early after-hours trading Thursday, after the announcement.

Mr. Rosen and the board had big trouble on their hands during the upheaval in the CEO's office. They were unhappy with Mr. Pfeiffer's efforts to make Compaq more competitive with Dell Computer Corp. of Round Rock. Mr. Rosen was also said to be unhappy with the company's apparent failure to foresee the importance of the Internet.

But the board also had given Mr. Pfeiffer the task – an unlucky one, in hindsight – of making a success of Compaq's $9 billion purchase of Digital Equipment Corp. in 1998. To this day, Michael Dell refers to the acquisition as the best gift Compaq ever gave to Dell Computer.

While Mr. Rosen called his decision to fire Mr. Pfeiffer "the toughest" task of his storied career in creating tech start-ups, he did not hesitate to act decisively in other cases. In 1991, Compaq laid off 12 percent of its work force and Mr. Rosen ousted co-founder Joseph R. "Rod" Canion, stunning investors and employees.

Things have been considerably more smooth for Mr. Capellas, who was promoted from chief operating officer of the Houston-based company to chief executive in July 1999. He was named after an outside search failed to produce a viable candidate.

During that time, Mr. Rosen served as interim CEO, and there was some speculation the CEO search was especially difficult because of his reputation as a hands-on chairman. Mr. Rosen served on the board for 18 years, 17 of them as chairman.

In his statement, Mr. Capellas said he was grateful for Mr. Rosen's guidance over the last 18 months as Compaq has struggled to find profits in the changing PC market.

"Ben has been one of the principal architects of Compaq's success since the company was founded in 1982. He set the standard of excellence and visionary leadership by which all of us at Compaq measure ourselves," Mr. Capellas said.

Mr. Rosen remains a director of several technology companies: Capstone Turbine Corp., Ask Jeeves Inc. and idealab Inc. He is vice chairman of the board of trustees of the California Institute of Technology, a board member of Memorial Sloan-Kettering Cancer Center, Columbia Business School and the New York Philharmonic.

Mr. Rosen has invested in dozens of start-up technology companies over the last 18 years, including Compaq, Lotus Development, Ciena, Citrix Systems, Cypress Semiconductor, Cyrix, Silicon Graphics and Electronics Arts. Companies funded by Sevin Rosen Funds, his venture capital organization, have a collective market value in excess of $100 billion and employ more than 100,000 people.

Mr. Rosen praised Compaq employees in a letter announcing his retirement. "I have watched you create one of the true pioneers of the high-technology industry and a major force in the global economy," he said. "I have worked with a lot of companies during the past three decades, but none has meant more to me than Compaq."