Founders: Rod Canion, Jim Harris, Bill Murto
Industry: Computer hardware and software
Year Founded: 1982
Year Defunct: 2013
Compaq was founded in February 1982 by Rod Canion, Jim Harris and Bill Murto, three senior managers from semiconductor manufacturer Texas Instruments. The three of them had left due to lack of faith and loss of confidence in TI's management, and initially considered but ultimately decided against starting a chain of Mexican restaurants. Each invested $1,000 to form the company, which was founded with the temporary name Gateway Technology. The name "COMPAQ" was said to be derived from "Compatibility and Quality" but this explanation was an afterthought. The name was chosen from many suggested by Ogilvy & Mather, it being the name least rejected. The first Compaq PC was sketched out on a placemat by Ted Papajohn while dining with the founders in a Houston pie shop. Their first venture capital came from Benjamin M. Rosen and Sevin Rosen Funds who helped the fledgling company secure $1.5 million to produce their initial computer. Overall, the founders managed to raise $25 million from venture capitalists, as this gave stability to the new company as well as providing assurances to the dealers or middlemen.
Unlike many startups, Compaq differentiated its offerings from the many other IBM clones by not focusing mainly on price, but instead concentrating on new features, such as portability and better graphics displays as well as performance—and all at prices comparable to those of IBM's PCs. In contrast to Dell Computer and Gateway 2000, Compaq hired veteran engineers with an average of 15 years experience, which lent credibility to Compaq's reputation of reliability among customers. Due to its partnership with Intel, Compaq was able to maintain a technological lead in the market place as it was the first one to come out with computers containing the next generation of each Intel processor.
Under Canion's direction, Compaq sold computers only through dealers to avoid potential competition that a direct sales channel would foster, which helped foster loyalty among resellers. By giving dealers considerable leeway in pricing Compaq's offerings, either a significant markup for more profits or discount for more sales, dealers had a major incentive to advertise Compaq.
During its first year of sales (second year of operation), the company sold 53,000 PCs for sales of $111 million, the first start-up to hit the $100 million mark that fast. Compaq went public in 1983 on the NYSE and raised $67 million. In 1986, it enjoyed record sales of $329 million from 150,000 PCs, and became the youngest-ever firm to make the Fortune 500. In 1987, Compaq hit the $1 billion revenue mark, taking the least amount of time to reach that milestone. By 1991, Compaq held the fifth place spot in the PC market with $3 billion in sales that year.
In 2002, Compaq signed a merger agreement with Hewlett-Packard for $24.2 billion. Most of Compaq’s products have been re-branded with the HP nameplate, such as the company's market leading ProLiant server line (now owned by Hewlett Packard Enterprise, which spun off from HP in 2015), while the Compaq brand was repurposed for some of HP's consumer-oriented and budget products, notably Compaq Presario PCs. HP's business computers line was discontinued in favour of the Compaq Evo line, which was rebranded HP Compaq. HP's Jornada PDAs were replaced by Compaq iPAQ PDAs, which were renamed HP iPAQ. Following the merger, all Compaq computers were shipped with HP software.
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