This is an impressive DQ Top 20 story. Of a PC vendor that entered India relatively late, in the mid-1990s. It acquired an established systems and solutions company in 1998-99, while entering the DQ Top 20 at No 5 in 1998-99. It soon set the PC marketing benchmarks for established players like HP and IBM. And it’s now made it to the Top 5 infotech groups of India—growing the fastest among the systems vendors.

Compaq entered India in 1994, setting up a subsidiary in 1997 with a Rs 45 lakh investment—later stepped up to Rs 2.25 crore. In July 1999, the share capital went up to Rs 88.5 crore (88 million shares), mostly held by Compaq Computer, USA. This year, almost the entire equity has been transferred to Compaq Mauritius.

Compaq India spent its first four years building up operations, channels, a first few retail outlets, and other core and support infrastructure. These included, in 1998-99, an assembly plant at the then recently-acquired Digital India’s facility off Bangalore, call centers in Mumbai, Delhi and Calcutta, and service networks (and packages) to tackle an unimpressive service reputation in India.

For a company in global and local turmoil, Compaq grew rather well. In 1998 came the acquisition of Digital India, unique in India because the latter retained its Digital identity as a services subsidiary. Systems and servers went to Compaq, which closed down most Digital product lines barring the Alpha-based UNIX servers. Digital India chief Som Mittal replaced Abhishek Mukherji as head of Compaq in India in 1998. A year down, Mittal went back to heading Digital India, as Balu Doraisamy took over at Compaq. Compaq took a global hit in its PC leadership and its earnings, went through a $1-billion restructuring and 8,000 layoffs, and sacked CEO Eckhard Pfeiffer, as a very low-profile Michael Capellas took over. The systems problems continued, Compaq losing global No 1 position to Dell – first in PCs globally, then in servers for North America in Q1 2001.

The turmoil is behind Compaq India, though. It saw rapid growth in India last year, far beyond its Asia growth of 16%, grossing $0.6 billion for Q1, 2001 in Asia excluding Japan and Greater China (PRC, Taiwan and Hong Kong). Global revenues for the same period were $9.2 billion, of which Japan, at 31%, has the biggest share outside the US.

In the year gone by, Compaq India displaced HCL Insys from the top PCs slot. Now, Compaq’s focus and challenge remains that of going beyond PCs to the more profitable S-segments: servers, storage, services. It’s done well in parts: its storage business grew 40% in India, and contributed 10% of Compaq Asia-Pacific’s storage revenues.

In high-end UNIX servers, Compaq is a distant number four in the global RISC UNIX servers segment. The gap in the Alpha’s life-cycle, during the Digital acquisition by Compaq, was not good for the Alpha; now, it’s nearing the end of the road for the Alpha. Compaq is switching to Intel’s Itanium for its high-end servers, and will "transfer its Alpha chip expertise" (people and technology) to Intel, leaving the RISC genre to Sun and IBM. And in Intel-based servers, whatever the global challenges from Dell, Compaq was a clear number one in India.

Compaq has now merged its consumer and commercial desktop PC operations under one roof. In India, this "Access Business Group", under director Ravi Swaminathan, will sell a range of devices that will access the Net: portables, hand-helds, MP3 players, and related services.

Compaq’s DQ Top 5 Group entry was helped by its services subsidiary’s performance. Digital India, which focuses only on software and services exports, has just reported its first full year of operations ending March 2001. Its revenues at Rs 184 crore represent more than a doubling of its previous year’s (annualized) revenues. Its hardware and networking services businesses were transferred to parent Compaq, while it stayed focused on software and services. With its unique position (only in India does the Digital logo still exist), Digital India describes itself simply as a "software and services multinational headquartered in India".

What’s next for Compaq? The global focus is on a systems recovery, from red ink to black. For India, Compaq will keep the pressure up on PCs to maintain the #1 slot, try to ramp up PC server sales to make up for any decline in its UNIX servers, and try for major projects to keep both systems and higher-margin services revenues up. Compaq Global Services plans to spend over $10 million on acquiring "a couple of companies in India" this year. This should help Compaq in closer to IBM Global’s services revenues in India, and keep up its growth and margins—a tough task in this financial year.