HP/Compaq: Good for our jobs?

It could be the biggest story of the year or it might never happen. But how will the HP buyout of Compaq affect us?

Post your comments in Dave's discussion forum
NET KNOW-HOW WITH DAVE KEARNS

By Dave Kearns

HP/Compaq: Good for our jobs?

It could turn out to be the biggest story of the year or it might never happen. "It" is the Hewlett-Packard buyout of Compaq and no matter how good it looks on paper, it's ultimately the bulls, bears and bozos on Wall Street who'll decide if the deal actually goes through.

Both companies' stock prices have been falling since the acquisition was announced, a sign that the big investors and the stock analysts aren't pleased with the deal. Of course, these are the same people who told you that a company with a sock puppet and a plan to sell you 100-pound bags of dog food over the internet was the next "big thing." You shouldn't have listened to them then, and you shouldn't listen to them now.

These two companies are a very good fit for each other. Compaq & HP servers coupled with Compaq desktops, HP printers, Compaq storage, HP's Jornadas and Compaq's iPaqs -- with the associated switches, hubs, routers and other necessary equipment -- reveal that there's not a lot of overlap in the offerings of the two organizations.

The biggest overlap problem is in the area of Unix operating systems. HP's HP/uX and Compaq's True64 are nothing to rave about and wouldn't cause much of a stir if they were buried tomorrow. Maybe it's time to do that and concentrate on Linux for the host market. Certainly the folks in Palo Alto know a lot more about Unix hosts, operating systems and utilities than the Houstonians who never could figure out what to do with the products they acquired from Digital.

Some wags are even claiming the Federal Trade Commission (FTC) will kill the deal because the two companies dominate the retail market for PCs. Now, if you look in the glossy supplements to your Sunday newspaper (the ads from Circuit City, Best Buy, Staples, Office Max, Office Depot, CompUSA and their ilk) you'll find that the HP and Compaq brands dominate in the number of PC models listed (over 75% of the listings, according to some sources). But -- and here's the real deal -- anybody can offer their PCs at similar prices to these mass merchant retailers! Merge HP and Compaq, and IBM, Dell, Gateway, even eMachines can step up and take their place. Once HP and Compaq stop competing with each other, there's all the incentive in the world for someone else to compete with the merged company.

For most of you, though, it's the server market that matters. Compaq was once almost a monopoly in the PC server market but has seen fierce rival Dell chip away at that dominance over the past few years. HP had even better credentials than Compaq in servers -- their NetServers continue to win "server shootouts," but have been hampered by a poor service record, something Compaq is still renowned for.

Now there are a lot of people in Silicon Valley who want to see Carly Fiorina fail, because she's supposedly abandoned the "HP Way." See http://www.siliconvalley.com/docs/opinion/svguest/mm090601.htm, by Forbes' Michael Malone, to fully realize the HP mystique and the opprobrium directed at Fiorina. Carly's biggest crime is that she's not named Dave or Bill (as in Packard & Hewett) and nothing she can do will satisfy the stodgy old boys yearning for the "good old days." There's less dirt thrown at Compaq's Michael Capellas, but there are still a few folks around who wish that the "good old days" under founder Rod Canion would return. Just remember to allow for a lot of sour grapes and personal attacks on the CEOs when reading about this deal.

On balance, this is a good deal for both companies, for the stock holders of both companies and for the customers of both companies. Some employees will suffer, but that would have happened even if there wasn't a merger. The bottom line for us is that this will help us do our jobs better. That's all we can ask of our vendors.

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This was first published in September 2001

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