Indeed, it was no technological wizardry or alchemic elixir that stole the flag in the PC business from IBM. It was Canion and his team assessing the business climate, watching for their opening and, when the time was right, proclaiming to the world, ÓThe emperor has no clothes.Ó

Those who were there in Compaq's early days say it was the slow-talking, straight-shooting Canion who made the palace coup possible. Canion was a consensus manager who instead of hiring employees, brought together colleagues. He was known for seeking input from everyone, assimilating the information, then doing the right thing.

What's more, when Canion spoke with his Southern drawl, he came off like John Wayne. People believed and trusted what he said, giving credibility and power to the upstart company from Houston.

ÓHistory shows that having Rod stand up to IBM when they created the PS/2 was the most important thing anyone has done for the industry,Ó says Gary Stimac, formerly Compaq's senior vice president and general manager of the systems division and the fifth employee to join Compaq. ÓIf he hadn't stepped forward [and championed standards], we would still have $5,000 to $6,000 PCs because of the royalties we would have to pay to IBM.Ó

Adds Ross Cooley, Compaq's former senior vice president of North American sales and currently chairman and chief executive of pcOrder.com, Austin, Texas: ÓCanion was a consensus manager. Everybody regardless of rank or business title could articulate their opinion and never with the fear of retribution. You've got to remember that the three founding people were middle managers that were good at some disciplines. They truly believed that two heads were better than one.Ó

But in the beginning, the three unemployed former Texas Instruments Inc. engineers had a slightly different plan: Make some money fast.

ÓWe hadn't seen this start-up thing coming out of a big company,Ó Canion says of his early fascination with the Silicon Valley style of doing business. But the Intels and the National Semiconductors and the Advanced Micro Devices were just a sideshow to what Canion viewed as the real revolution. Then the PC market began to take off, he says. ÓVisiCalc on the Apple was the match that lit the fire, but the IBM PC created all the thunder. When that came out, the flag went down, the light bulb went off, and it was time to go off and do something in this industry.Ó

By the summer of 1981, the three soon-to-be entrepreneurs began talking seriously about breaking away from TI and starting off on their own. And Canion admits that the trio even flirted with becoming the three amigos: One of their initial plans was to open a Mexican restaurant in Houston.

Instead, their original business plan called for them to build a Winchester disk drive for the IBM PC. Canion and his partners showed the plan to the venture capital firm Seven Rosen in October 1981. Seven Rosen was noncommittal but told the trio to keep working. Canion met with Seven Rosen again at Comdex/Fall of that year, and this time the firm was interested in the plan.

Canion and company quit TI in the fall of 1981, giving themselves a six-month window to get their new high-tech venture off the ground.

ÓThat very next week we got a call from Seven Rosen saying, 'We decided not to fund you,' Ó Canion says. ÓThe call was one of those pivotal things. Now that we were out of TI, we thought we should step back and see if there was something more interesting, something broader we could do.Ó

With the six-month clock running, Canion spent the Christmas holidays racking his brain. On Jan. 9, 1982, the idea that would change the PC industry forever came to him. He decided to make a better portable PC than the Osborne. But more importantly, it had to run IBM software, a concept of adhering to industry standards that would become Compaq's hallmark.

ÓThat whole way of thinking separated us from the pack,Ó he says. ÓWe didn't set out to build an IBM-compatible computer. We set out to build the world's best portable.

But in order for it to have software, we had to have it compatible with the IBM PC. We knew how far we'd get if we had software developers uniquely writing software for our product.Ó

From that moment, Canion and Compaq began a dizzying ascent into the ranks of high-tech history. Seven Rosen and other venture capitalists kicked in $1.5 million in start-up money and what would later become Compaq was born. The first prototype was ready by June, and another round of $8.5 million in venture capital was secured.

Then Canion made another pivotal decision that would propel Compaq into becoming the fastest-growing company in the history of American business: He chose to sell the new Compaq portables only through dealers. ÓIt was a selling point for us to sell only through dealers, and it was a basic premise to sell only through resellers,Ó he says.

In January 1983, Compaq shipped 200 portables. In December 1983, it shipped 10,000. First-year sales were $111 million, the largest first-year sales in business history. But then the orders stopped in early 1984.

ÓWe saw two weeks of no orders and, sure enough, it was because IBM was coming out with a portable,Ó says Canion. ÓThe dealers looked at it, the customers looked at it, and a few weeks later, the orders flooded in higher than before. We had established ourselves. It could have been a bullet to the head, but it just zinged by and we barely noticed it.Ó

More importantly, IBM's incursion into Compaq's market forced Compaq to take off the gloves and go after IBM's core PC business. ÓBecause they came after us with a portable, we began a crash course to come out with a desktop,Ó he says.

By July 1984, Compaq had come out with its first Deskpro desktop that Canion said was comparable in price but five times faster than the IBM PC. Then IBM made a blunder that precipitated the end of its dominance of the PC market, says Canion.

In 1986, Intel Corp. wanted to introduce its new 386 processor, but IBM wanted to delay incorporating the new chip into its PCs. Intel instead went looking for a new partner for the 386, and Compaq was a willing customer. In September 1986 the Deskpro 386 was introduced, helping to push Compaq's 1986 revenue to $625 million. On the strength of its lead in the 386 market, 1987 revenue reached $1.2 billion.

But Canion decided in 1988 that it was time for Compaq to lead the industry, not follow IBM. In September 1988, Compaq, with the support of Intel and Microsoft Corp., was the leader of the Gang of Nine PC clone vendors that defied IBM's proprietary Micro Channel push and instead established the EISA industry standard.

With Compaq wresting the leadership in the PC business away from IBM, Canion readied yet another strike that would take aim at IBM, Digital Equipment Corp. and other legacy companies: using PCs as servers in networking environments.

But taking Compaq from a PC company to an enterprise computer company would fall to Eckhard Pfeiffer, not Rod Canion. In a move that seemed shocking at the time, the founder of Compaq in 1992 was removed from his post by the board of directors in favor of Pfeiffer.

ÓRod was an entrepreneur and a visionary that was loved by everyone in the industry, but was he the right person to grow the company to $20 billion or $30 billion?Ó says Stimac. ÓOnly Bill Gates and Andy Grove have been able to go through that type of situation. Eckhard got the mission from the board that building a low-cost PC was to be [one of] his top five priorities, but it wasn't Rod's priority.Ó

Canion says, ÓEckhard's done a phenomenal job since 1992. History has shown that he's a big-company-type manager where I was very entrepreneurial.Ó And it is as the entrepreneur that Canion has secured his place in history.