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HP Buys Compaq
MaxVlast was the first to report: "The New York Times is reporting that HP is buying Compaq to form the second-largest computer company (after IBM). Wow."
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If I remember correctly, Compaq had eaten up a lot itself. Didn't it do Tandem (high end corporate mainframe like machines) and whoever did the Alpha (Digital, right)? I don't see how those have really grown, but maybe they've got some eye on some of Tandem's technologies for their midrange line. But you'd have to think that Compaq has a bit of indigestion from it.
Now, here comes HP, buying up Compaq? Well, at least Alpha/Tandem seems like a better fit for HP than it ever did for Compaq.
Anyhow, it seems like HP is picking up a LOT of baggage that they're going to end up throwing away. Sounds like an awfully risky business venture.
With this one, I'd have to say that Fiorina has some balls
- Hewlett-Packard to Cut 6,000 Jobs (July 27, 2001)
- Compaq's Revenue and Income Fall (July 26, 2001)
- Hewlett Profit Falls but Beats Expectations (August 17, 2001)
- Compaq to Emphasize Computer Services (July 17, 2001)
- Market Place: Compaq Announces More Layoffs (July 11, 2001)
Big time mergers are usually between successful companies or at least where one of the companies is having a particular successful run, this looks like a merger of companies are both fucked. Also considering the amount of overlap in their products, expect more layoffs.Sad, indeed.
Pending regulatory approval, the new company will hold a 19% share of the global PC market. Dell comes in second at 13%. Also interesting HP-Compaq will hold a 37% share of the market for high-end servers. With such a 500 pound gorilla on the field, it would definitely be nice for them to emphasize Linux support.
The big loser in the deal - Lexmark. Compaq had been one of their largest customers for bundled printers.
- Carpe diem, quam minimum credula postero.
I'm amazed... wow!
However, I think it's bad that HP is buying Compaq, instead of the other way around... I've never been impressed with HP's products (other than printers, which are the best), particularly their servers or workstations.
I've always preferred Compaq's to theirs. It will be sad to see the end of the Deskpro workstations and ProLiant servers, which were always a pleasure to install, set up, and even repair. I've had to replace several customer's paper-thin motherboards in HP NetServers... Compaq servers are built to Millspec, like most of the IBM servers. HP's are more plastic and flash, much like Dell servers.
Ms. Fiorna has pretty much led HP down to ruin since jumping off Lucent just before THEY went to ruin, so entrusting her to lead this new beast may be a shaky proposition. I don't really see how swallowing Compaq will really gain HP anything new, as the only really interesting technology Compaq had (Alpha) they've pretty much given away. I see this as HP gaining a lot of overhead, a lot of revenue, but little in the way of additional profit, as Compaq has the very same market problems HP did.
Looks to me like the only REAL gain HP makes is getting a MAJOR competitor out odf the way...
=== The price of freedom is eternal vigilance
Enjoy your holiday. This merger is cool news for an otherwise boring news-less day.
Pat
Very few mergers succeed, even when there does appear to be some legitimate synergy or corporate fit. On paper it made a lot of sense to combine Chrylser and Daimler. In practice, the two cultures were so different that they seem bent on destroying each other rather than making the combined company better.
Now Carly is going to take two companies, each weakened by current economic conditions, and combine them. Where exactly is the synergy? Two manufacturing organizations, neither the lowest cost nor highest quality in their market, and both in thrall to Intel? That's a good combination.
And so on down the line. Synergy is vastly overrated when it EXISTS, and I have a hard time seeing any hear. Doubling the size of the Titanic would only have caused it to sink twice as fast!
sPh
Compaq management fucked up with the purchases of Tandem and Digital. Totally wasted billion dollar investments. Very sad.
HP made this investment for Digital and Tandem technology, and Compaq's sales and marketing. HP always had stronger datacenter service than Compaq-proper.
Compaq itself is only an interesting brand name and marketing channel. There's no way that HP keep the existing Compaq PC line going. The only advantage of HP buying Compaq is that HP now has one less competitor.
Amazing isn't it how one poor decision leads to an avalanche of further massive expenditures, good money following bad? HP decided it didn't want to spend the resources on the next generation of PA-RISC, so it decided to partner with Intel on Itanium. Unfortunately this was in time to concede huge markets to Sun, a company that has chosen to go against Wintel in both hardware and software. So HP missed out on the boom. And now it's trying to make up ground in the downturn. Look near the bottom of this article from Forbes. Since 1994! HP has been caught in a trap where it is perceived that its flagship processor will be phased out. Under those circumstances it is impossible to grow that part of the Unix business. So HP has been caught trying to sell "NT workstations", expanding into selling consumer PCs, anything to generate the slightest bit of revenue.
Meanwhile Sun and IBM went on developing their next generation 64 bit processors. After the downturn ends, and it will end, who are going to be in a better position, companies who sell their own chips or companies that are fighting to be Intel resellers? What exactly will be the barrier to one's competitors also becoming Intel resellers if that is right?
What no one seems to want to acknowledge is that if Dell continues to hold the lead in efficiency, there really is no reason for any other major player to be in the commodity Intel PC business. It doesn't matter if you're twice, three times, whatever Dell's size. If Dell is more efficient, if Dell can make money and expand even in a downturn, it's only a matter of time. And Dell can use its current strong position to keep moving up into higher revenue markets.
The combined HP/Compaq will not be able to cut a better deal from Intel than Dell can because Dell has always been an Intel-only shop, the most loyal one. Dell's competition in laptops is Sony not from anything HP/Compaq does. The only area HP/Compaq has an edge is in PDAs.
Let's think--who will survive selling PCs in five years and why. Dell wins because they are the most efficient. Sony wins because they can bundle multimedia goodies and sell at a premium, plus if PCs are getting to be more like commodities, Sony has the edge in consumer electronic design. Apple stays alive by staying off Intel and also exploiting its reputation in education and multimedia. (Although in education it is once again Dell that is the main competitor, not HP or Compaq.)
What's especially absurd is that neither HP nor Compaq can exploit what makes Dell so efficient because they can't solve the problem of how to sell directly without alienating the middlemen distributors. This problem is impossible to solve with the companies' present business model.
The prospect of trying to combine a corporation whose roots are in the Bay Area of California with one whose roots are in Texas--how come no one questions these catastrophic mis-marriages of disparate corporate culture? Houston, Texas and Palo Alto, California?! What a joke.
Consider the size of these companies. Buying a competitor is just the first step. Truly merging on an operations level will probably take serveral years.
Yay. ANOTHER big corporate merger.
Call me paranoid, but IMO this is just getting ridiculous. I lost all faith in the government's enforcement of the concept of anti-trust when they let AOL and Time Warner merge. Of course, (HP + Compaq) < (AOL + TW), but come on...
How many huge corporate mergers are we going to have? Soon we're just going to have one giant corporation controlling everything. My video card's boot message ("3Dfx Interactive Inc.* \ A subsidiary of the AOL-Time Warner-Microsoft-Intel-ABC-NBC-CBS Corporation") will be true one of these days, at the rate we're going.
Notice the words "buying a competitor" in hillct's post. On a smaller scale, such as at the local-local level, this isn't such a big deal. But when you take two large corps that are competing against one another (plus only a couple others) for business nationwide, and let one buy the other, that's one less choice for the consumer. It's also one (much) larger corp that, due to its size, has to spend that much less time worrying about its competition. In the end, the consumer loses.
* Now owned by nVidia. Granted, 3Dfx was having tough times financially, but still...
I pledge allegiance to the flag...
of the Corporate States of America...
In a stunning move, stunning because of the lack of a sense of history, HP simply repeats the same blunder it made when it purchased Apollo to temporarily become the "Number One Seller of Workstations". Only this is on a larger scale.
Absolutely. I used to work for HP back in 1989 when they made said aquisition. Within the hallowed halls, there was much rejoicing. Everyone was told, hey, now HP will make better workstations using Apollo technology! Didn't happen. Instead, all the Apollo techs left in disgust, and Apollos were killed dead. (I'm not entirely sure of the order in which that happened, though!) (-8
Prediction: Massive layoffs at Compaq, destruction of Compaq computers, little assimilation of technology, little merging of the workforce. They may actually delude themselves that they will make use of Compaq resources, but company mergers never work. One company always swallows the other, corporate politics and survival-of-the-fittest reign.
From what some people have been saying, HP's corporate culture is still better than Compaq's, so that's one hopeful thing -- if HP is the winner in the silent battle.
Unfortunately, when one's job is on the line, nobody is going to be objective in evaluating whether Project A or Project B is the better one -- even if Project B is obviously miles better than Project A, if some middle manager loses power if things go with Project B, they are going to push Project A for all its worth(less). Human nature.
Now imagine that happening multiplied by thousands, for the thousands of employees who are going to be laid off by this merger. Don't expect sensible decisions.
In case you're wondering how I left HP... our section was "downsized" because Head Office wanted to get out of Applications Software... But it was a nice place to work while I was there, and they tested things to death. Quality control, you betcha.
So, despite all my doom and gloom, I don't think HP will die. Just don't expect anything wonderful out of this merger.
-=- Say it with flowers. Send a Triffid. -=-
I spent a year there (my contract at HP expires in three days), and I've seen the environment.
I'm kind of optimistic about the deal from the companies' point of view. First of all, who is going to suffer:
1) Competing printer makers. For now Compaq was rebranding Lexmark printers, so they are screwed.
2) OpenVMS and HP3000 users. HP is trying to get rid of all old platforms (like HP3000). OpenVMS will probably be put on life support (it was doomed after Compaq could not produce Alphas anyway).
3) Digital UNIX users. I think HP will try to move them to much more widespread HP-UX (many of the vendor packages are released for Solaris and Linux first, HP-UX second, and AIX third. TRU64X and Irix are distant fourth, and many don't even port there). I'd guess that they might even release an emulator of the system calls to just recompile programs on HP-UX scaling down Alpha products.
4) Stratus Computers (www.stratus.com). This competitor of Tandem uses HP processors and OS now, and they are going to get a competition from HP.
5) Employees.
Do you know that these corporate behemoths do not build their stuff? I've recently seen an inside auction where the last HP inkjet made in the US by HP was auctioned. All of the printers and PCs are now built by subcontractors (such as OMNI, Solectron, et al). Consolidation of the products will allow to reduce the design, development and testing staff. Also reduced will be support (eventually, after consolidating the products).
OTOH, the deal will help HP get through the hard time of the market slowdown by sharply increasing their inkjet's market share (using Compaq's strength in retail). Expect Lexmark's shares to fall.
Second, it will give them the reliable computing in Tandem. I don't know if Tandem computers were shifted from MIPS to Alpha, but the next generation of them will definitely use McKinley processors because their customers value reliability over speed and cost, and any processor will suffice.
Third, integration will give them GOOD REASON to discontinue older product lines at both Compaq and HP. These are decisions that usually involve a lot of power struggle, but the merger puts a "force major" mode on.
Conclusion: HP is buying itself a market share and sales channel for its PCs, PC servers and printers plus economics of scales. Also it buys itself a chance to do a full scale reorganization.
Finally, HP did not fire CEO. The fucker's name is Rick Beluzzo (doesn't it sound familiar?), and CEO's name was Lew Platt who peacefully retired. Beluzzo was the one pushing M$ into all holes. Later he went to head SGI (hence THEIR NT boxen), and now works where he belongs - in BillG's brothel.
Tigers respect lions, elephants and hippos. Maggots respect no one. (C) S. Dovlatov