Compaq's CEO on Microsoft, Napster
Capellas said that breaking up Microsoft (msft) as proposed by the U.S. Department of Justice would add more complexity and "moving parts" to the already intricate factors manufacturers such as Compaq must consider when building for the marketplace.
"Everyone in this industry is trying to drive simplicity, but with all the modularity in this industry, blending these moving parts is a challenge. We should be scared to death by the number of moving parts," said Capellas.
The best test for deciding whether legal action is needed against a company is to determine if consumers would be hurt, said Capellas. If so, the legal system should step in. But if not, let free enterprise take its course.
Microsoft on Wednesday asked Judge Thomas Penfield Jackson to consider an "offer of proof" containing the names of industry executives who would testify that breaking up the company would harm computer makers, software companies and the industry in general. The list included Dreamworks founder Jeffrey Katzenberg and Capellas.
Capellas, 44, was named Compaq's CEO on July 22, 1999.
Compaq's (cpq) chief provided comments Thursday night to members of the Churchill Club here. Topics ranged from Napster to Compaq's investment strategy.
When asked about Napster, Capellas said he felt the protection of intellectual property is of foremost importance in the PC world. The popular music file trading site is under fire from the recording industry because unauthorized copies of recordings are exchanged with no royalties going to the artist.
While the industry and government have acknowledged the problem of preserving intellectual property in the digital age, a solution is needed.
Capellas also discussed what it would take to expand use of the Internet. Making it accessible through different devices will help, and for that Compaq has chosen Microsoft's Pocket PC operating system for its iPaq device.
Strategically, what will drive innovation for the Internet will be a merging of content, computation and communication, he said. But since it will be difficult for any one company to have all three of these assets, companies that prove best at partnering will be the ones that succeed.
On other topics, Capellas said:
The shortage of some microprocessors is slowing momentum in the industry, with smaller companies most hurt. However, he is more concerned about a lack of secondary components such as memory and predicted that everyone would be scrambling for supplies.
Compaq invests in companies just to have access to components. Compaq also makes investments to gain access to markets, such as its acquisition of Digital Equipment Corp., and for brand extension.
"We're in the business of knowing what technologies should succeed and fail, so it's only natural that we get involved in investing," said Capellas.
The market is getting back to rewarding earnings, as evidenced by the stock declines in profitless Internet companies.
The digital divide will continue to increase, not narrow. In order for future generations to reach at least the same level of success that previous generations have achieved, the issue must be addressed.
"Corporate America has some major responsibility to help close the gap, but most importantly, teachers must get involved," said Capellas.