At the same time as they began to dominate the server market, in the early 1990s Compaq entered the retail computer market with the Presario, and was one of the first manufacturers in the mid-1990s to market a sub-$1000 PC. In order to maintain the prices it wanted, Compaq became the first top-tier computer manufacturer to utilize CPUs from AMD and Cyrix. The price war resulting from Compaq's actions ultimately drove numerous competitors, most notably IBM and Packard Bell, from this market.
In 1997, Compaq bought Tandem Computers, known for their NonStop server line. This acquisition instantly gave Compaq a presence in the higher end business computing market. In 1998, Compaq acquired Digital Equipment Corporation, the leading company in the previous generation of minicomputers during the 1970s and early 1980s. This acquisition made Compaq, at the time, the second largest computer maker in the world in terms of revenue. Unfortunately for the company, CEO Eckhard Pfeiffer, who engineered both mergers, had little vision for what the combined companies should do, or indeed how the three dramatically different cultures could work as a single entity, and Compaq struggled as a result. Pfeiffer was forced out as CEO in 1999 in a coup led by board chairman Ben Rosen and was succeeded by Michael Capellas, who had been serving as Compaq's CIO. Capellas was able to restore some of the luster lost in the latter part of the Pfeiffer era, but the company still struggled against lower-cost competitors such as Dell.
During November 1999, Compaq began to work with Microsoft to create the first in a line of small-scale, web-based computer systems called MSN Companions.
In 1998, Compaq also signed new sales and equipment alliance with NaviSite. Under the pact, Compaq agreed to promote and sell NaviSite Web hosting services. In return, NaviSite took Compaq as a preferred provider for its storage and Intel-based servers.
Compaq's headquarters complex consisted of 80 acres (320,000 m2) of land in unincorporated northwest Harris County, Texas. The land had fifteen office buildings, seven manufacturing buildings, a product conference center, an employee cafeteria, mechanical laboratories, warehouses, and chemical handling facilities.