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Compaq's Quest for a CEO

Acting CEO Ben Rosen is shaking things up, but money managers say the company still lacks leadership.

In the PC industry, it seems as if the wrong company is nearing the end of its CEO search.

A resurgent

Hewlett-Packard

(HWP)

says it is 30 days away from selecting someone to

replace top gun Lew Platt.

But H-P is not the one desperate for leadership. The once rudderless company is making a smooth transition while former bright spark

Compaq

(CPQ)

is struggling to find a new voice. There seems to be no end in sight for Compaq's CEO search.

Since showing former CEO Eckhard Pfeiffer the door in April, Compaq's behind-the-scenes chairman, Ben Rosen, has been reshaping the world's largest PC maker out of Pfeiffer's old office in Houston.

Rosen, who normally co-manages the New York-based money management firm

Sevin Rosen Management

, has cleared out Pfeiffer's lieutenants, including the general manager of worldwide sales and the head of Compaq Services. Just last week, the head of the enterprise computing unit resigned. Rosen filled this position with Compaq PC marketing head Enrico Pesatori, who will also serve as the acting chief operating officer. Rosen also appointed Fred Jones of information services as acting chief information officer. Ben Wells is the acting chief financial officer.

Compaq Investors Still Hurting
Rosen may want to hire a CEO sooner rather than later.

Source: Baseline

Rosen, the acting CEO, said in a statement that these moves will "realign Compaq's organization to speed decision-making and improve execution." But he should be focusing on hiring a new figurehead first, say money managers.

"What if the new CEO doesn't get along with these people?" asks one hedge fund manager who requested anonymity. "I think Compaq should let the new CEO bring in executives he can work with." The fund manager is a Compaq stock owner.

Money manager Paul Schupf of

Paul J. Schupf Associates

says Compaq can announce whatever it wants regarding a CEO, but the company still needs to shore up its distribution system. "Compaq screwed up its reseller relationships and is going to be a basket case for months," says Schupf, a PC investor who currently has no position in Compaq.

Although Rosen has

streamlined Compaq's distribution network from 40 to four, he has yet to make the move Wall Street is waiting for. Compaq's stock has barely budged from the 52-week low of 22 3/4 it hit on April 19.

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Some are concerned that Rosen will become another interim CEO in the mold of

Apple's

(AAPL) - Get Apple Inc. (AAPL) Report

Steve Jobs, who has been the interim head since 1997. Schupf disagrees. "Does he want to come under the same kind of scrutiny as Pfeiffer? I don't think so."

Compaq spokesman Alan Hodel says the company has set no timeline on when it will hire a new CEO, but is actively seeking a replacement. Chicago-based executive recruiters

Heidrick & Struggles

are leading the CEO search, but Compaq does not allow Heidrick to comment about the search, said a company spokeswoman.

Rosen didn't return calls seeking comment.

H-P's Platt, meanwhile, has been very up front with the Street in terms of that company's CEO timeline. H-P's stock has responded, shooting up over 30% this year.

With so little guidance from Compaq on the search, Wall Street is coming up with its own CEO candidates, who range from the ideal --

Oracle

(ORCL) - Get Oracle Corporation Report

COO Ray Lane -- to the dreamlike --

DELL

(DELL) - Get Dell Technologies Inc Class C Report

CFO Tom Meredith.

Compaq's selection process has also been complicated by H-P's

CEO search. "H-P and Compaq are talking to the same cast of characters. That has to make it a little more difficult for Compaq," says

BancBoston Robertson Stephens

analyst Dan Niles, who has a buy rating on Compaq and picks Ray Lane as his CEO candidate. His firm has done no underwriting for Compaq or H-P. Niles rates H-P a long-term attractive.

Rosen, who presides over Compaq much like the way George Steinbrenner presides over the Yankees, could scare away prospective chief executives. When things are going well, as they were when Pfeiffer first took over the reins from Rod Canion in 1991, Rosen keeps a low profile. But when things go astray, Rosen makes his presence felt, as he did in April. "I don't know how many people want to work for Rosen right now," says Schupf. Rosen also summarily booted Canion, a Compaq co-founder, from office and replaced him with Pfeiffer.

Compaq shareholders, long accustomed to the strong leadership of Pfeiffer, are taking a wait-and-see approach. An announcement of a new CEO, say insiders, will wake them up.