Compaq: A House of Pies Placemat, Rod Canion's Ouster and the HP Merger

Got something to say to this podcast? Send a voicemail, and you might hear yourself on the next episode!

In 1982 Texas Instruments managers Rod Canion, Jim Harris and Bill Murto sketched a portable computer on a placemat at a House of Pies in Houston, after considering opening Mexican restaurants instead. Backed by venture capitalist Ben Rosen, they built the nearly 30-pound Compaq Portable, fully compatible with the IBM PC, and spent $1 million on clean room reverse engineering so two separate teams could recreate IBM's BIOS without copying it. Compaq sold 53,000 units and reached $100 million in first-year revenue, the first startup ever to do so. In 1986, encouraged by Bill Gates, it shipped an Intel 386 PC before IBM, and it later led the Gang of Nine's open EISA standard against IBM's Micro Channel.

After a $71 million quarterly loss in 1991, Rosen secretly sent engineers to the Comdex trade show to prove a cheap PC could be built quickly from standard parts, and after a 14-hour board meeting Canion was fired. Employees protested and bought a newspaper ad thanking him. Eckhard Pfeiffer launched the Presario price war and made Compaq the world's top PC maker by 1994, then bought Tandem Computers in 1997 and Digital Equipment Corporation for $9.6 billion in 1998. As Dell's direct model gained ground, Rosen ousted Pfeiffer in 1999. Michael Capellas launched the iPAQ, but in 2001 Compaq agreed to a $24.2 billion merger with Hewlett-Packard, and the brand eventually became a licensed budget label.

• Compaq refused to bundle free software, betting on IBM compatibility alone.
• Canion's campus had no reserved parking, even for the CEO.
• The LTE became the first commercially successful notebook computer.
• Pfeiffer had stationed security guards on the eighth floor to control access to his office.
• The SEC penalized Deutsche Bank over proxy voting conflicts tied to the HP vote.