# HP and Compaq to merge... **URL:** \ **Category:** In My Humble Opinion\ **Created:** [September 5, 2001, 10:44am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836 "2001-09-05T10:44:43Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![grimpixie](https://avatars.discourse-cdn.com/v4/letter/g/ecb155/32.png) [@grimpixie](https://boards.straightdope.com/u/grimpixie)\ **Post date:** [September 5, 2001, 10:44am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/1 "2001-09-05T10:44:43Z")
> [@](#): > > The world’s second biggest computer maker, Hewlett-Packard and third-ranked Compaq Computer will merge in a $25 billion stock deal, the companies announced Monday. From [CNN](http://europe.cnn.com/2001/BUSINESS/asia/09/04/hp.compaq/index.html) yesterday morning. So, how will this affect the global computer industry? Some thought that it will not be allowed to go ahead in the EU, but may go ahead in the USA. This may well belong in GD, but I thought I’d start it here. Gp ---
**Author:** ![ShibbOleth](https://avatars.discourse-cdn.com/v4/letter/s/848f3c/32.png) [@ShibbOleth](https://boards.straightdope.com/u/ShibbOleth)\ **Post date:** [September 5, 2001, 1:49pm UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/2 "2001-09-05T13:49:38Z")
[sub]First, my prediction is that this will end up in IMHO[/sub] Now here is some stuff from the WSJ on what to expect: > [@](#): > > As Ms. Fiorina plans her strategy for the merged company, she doesn’t have many successful case studies among the computer-industry’s mergers during the past 20 years. She has H-P’s own experience as a cautionary tale: It acquired a computer maker named Apollo Computer Inc. in 1989, but found the task of melding the company into H-P far harder than expected. Compaq has its own case study: Its 1998 purchase of Digital Equipment Corp. is largely viewed as a failure. > > “We know how hard these acquisitions are. Name one successful one in the PC industry – you can’t,” said John Loiacano, chief marketing officer at Sun Microsystems Inc., an H-P rival. “People said Compaq merging with DEC was a pig in a python. Well, this is going to be a porcupine in a python.” > > Some big investors are equally dubious. “There is huge execution risk here,” says portfolio manager Steve Salopek of Banc One Corp., which owned 8.5 million shares of H-P as of June 30. He is doubtful there are any benefits to the deal. “All you are creating is a bigger company that isn’t credibly positioned,” he said. “Merging the two together doesn’t accelerate growth at either one.” For the [full article](http://interactive.wsj.com/articles/SB999610074430373667.htm). Net, neither company is doing that well lately and the success of either current leader is spotty at best. Add that to “this has never been successfully done” and it helps explain the market’s lukewarm response. The PC industry has fairly low barriers to entry versus things like car or steel manufacturing (see: Dell Computers). So if they don’t get enormous efficiencies/economies of scale out of this merger it’s going to be an enormous flop. ---
**Author:** ![manhattan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manhattan/32/7_2.png) [@manhattan](https://boards.straightdope.com/u/manhattan)\ **Post date:** [September 5, 2001, 2:07pm UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/3 "2001-09-05T14:07:51Z")
> [@](#): > > \*Originally posted by ShibbOleth \* > \*\*[sub]First, my prediction is that this will end up in IMHO[/sub] > > \*\* We have a winner! Off to IMHO. ---
**Author:** ![WolfpackJeep](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wolfpackjeep/32/2921_2.png) [@WolfpackJeep](https://boards.straightdope.com/u/WolfpackJeep)\ **Post date:** [September 5, 2001, 9:27pm UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/4 "2001-09-05T21:27:33Z")
The one thing I really don’t understand is how the two companies plan to merge their products. For example, both companies make a Pocket PC–Hewlett-Packard’s Jornada and Compaq’s iPaq. Will one be discontinued, or will they continue producing both devices (perhaps under a different name)? I think discontinuing either product would cause problems for the new company, particularly in terms of lost customers. ---
**Author:** ![rjung](https://avatars.discourse-cdn.com/v4/letter/r/45deac/32.png) [@rjung](https://boards.straightdope.com/u/rjung)\ **Post date:** [September 5, 2001, 11:32pm UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/5 "2001-09-05T23:32:08Z")
HP will squash Compaq into nonexistence, mark my words. Eh, it’s not as if anyone really cares anyony – one generic geige Windows box is the same as another… ---
**Author:** ![tradesilicon](https://avatars.discourse-cdn.com/v4/letter/t/439d5e/32.png) [@tradesilicon](https://boards.straightdope.com/u/tradesilicon)\ **Post date:** [September 6, 2001, 12:08am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/6 "2001-09-06T00:08:24Z")
> [@](#): > > HP will squash Compaq into nonexistence, mark my words. Not quite. HP will be the company name, but at least one major division will be headed by a Compaq exec, and at least several major product lines will be the Compaq products. HP will of course keep priting and imaging as it is, and will continue the HPUX developement on the Itanium platform. Compaq (new HP, old Compaq people) will be in charge of servers running Win2K and Linux, HP people and Compaq people will both be involved in services. Still, a minimum of 15,000 people will be laid off, and more if they will really seek efficiencies. The two companies overlapp in servers (Intel-based), Storage, Business and Home PCs, laptops, handhelds, amd more. They will shed thousands of people to create a leaner company. They may have something in a year or more, but the near future is weird to say the least. ---
**Author:** ![handy](https://avatars.discourse-cdn.com/v4/letter/h/b5a626/32.png) [@handy](https://boards.straightdope.com/u/handy)\ **Post date:** [September 6, 2001, 1:28am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/7 "2001-09-06T01:28:24Z")
The stock market is NOT thrilled with this idea. ---
**Author:** ![Chas.E](https://avatars.discourse-cdn.com/v4/letter/c/e99b99/32.png) [@Chas.E](https://boards.straightdope.com/u/Chas.E)\ **Post date:** [September 6, 2001, 9:22am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/8 "2001-09-06T09:22:36Z")
> [@](#): > > \*Originally posted by rjung \* > **HP will squash Compaq into nonexistence, mark my words.** Absolutely right. Remember what happened to DEC when Compaq ate them. The best analysis I’ve seen so far: > **[Princess Fiorina kisses the Ugly Frog](https://www.theregister.com/2001/09/04/princess_fiorina_kisses_the_ugly/)** > > Mirror, Mirror on the wall - who's the vainest of us all? And for the lighter side: > **[Revealed! The secret memos that ignited the HP/Compaq merger](https://www.theregister.com/2001/09/05/revealed_the_secret_memos/)** > > Lunch? Sure! I read some allegations that the merged HP-Q will soon release a new OS, produced by Intel that competes with Microsoft. Don’t remember where I read that. I think it’s a mistake, they’re confusing HP’s support for legacy Tandem systems. ---
**Author:** ![SPOOFE](https://avatars.discourse-cdn.com/v4/letter/s/c5a1d2/32.png) [@SPOOFE](https://boards.straightdope.com/u/SPOOFE)\ **Post date:** [September 6, 2001, 9:39am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/9 "2001-09-06T09:39:47Z")
I predict we’ll see a repeat of the Daimler-Chrysler merger… the “in-charge” company will cause the “smaller” one to dwindle. Not to say that I see a comparison 'tween Compaq and Chrysler… I, for one, will shed no tears if Compaq vanishes off the face of the Earth. ---
**Author:** ![Bartman](https://avatars.discourse-cdn.com/v4/letter/b/779978/32.png) [@Bartman](https://boards.straightdope.com/u/Bartman)\ **Post date:** [September 6, 2001, 5:33pm UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/10 "2001-09-06T17:33:17Z")
Of course there are also some really oddball groups in both companies. What does this mean for the MPE or VMS operating systems? Neither HP nor Compaq has been making much off of either of them but there is maintinace revenue, and frankly the threat of lawsuits if either were just dropped. What will happen with the house flavors of Unix? HP-UX is a market leader and strong competetor to Solaris. Tru64 is usually listed as the fourth major flavor. Are they going to try to merge the lines? And what implications does that have hardware wise? If they have to spend millions trying to integrate the systems while IBM and Sun are using the same time and money making improvements they will lose market share. If they don’t integrate, they don’t get any advantage by being one company. My understanding is that when Compaq bought Digital they were looking at a couple things that could help the company. They really weren’t looking at all the other programs that came with it. They have mismanaged the Tru63 and VMS operating system lines. They have mismanaged the Processor lines. At the very least they should have forced Microsoft to pay for dropping the Alpha. Looking at the new merger I see the same thing happening. Both are looking at each others’ service and PC divisions. They have blinders on when looking at the whole package. In the end I think the new joint company will take years to straighten the whole thing out. I for one am not looking forward to dealing with them in the transition period. ---
**Author:** ![LordVor](https://avatars.discourse-cdn.com/v4/letter/l/90ced4/32.png) [@LordVor](https://boards.straightdope.com/u/LordVor)\ **Post date:** [September 7, 2001, 4:59am UTC](https://boards.straightdope.com/t/hp-and-compaq-to-merge/79836/11 "2001-09-07T04:59:13Z")
Anybody who thinks this is about dominating the PC market and taking on Dell, which seems to be pretty much every major analyst and armchair CEO’s take on the deal, is silly. Heck, HP’s shareholders have been hinting that HP shouldn’t be making PCs anymore for about 6 months now. It’s highly unlikely that they’d go for a deal to INCREASE their unprofitable PC manufacturing buisiness. Both companies know that there’s no profit in PCs unless you go the DELL route. This deal is to combine HP’s high-end, datacenter servers and storage with Compaq’s midrange servers and storage, consulting services, and marketing department. They want to take on IBM, and make those sweet high-profit consulting dollars. I still can’t believe that the CEOs make a point of saying that their combined market share will be larger than Dell’s market share in the PC space, but didn’t say anything about their combined market share of the highly profitable enterprize storage market taking over the #1 spot from EMC. Whether or not they can accomplish this, and whether HP’s printer consumable revenue can carry them until they do this is the real issue. Personally, I’m a bit concerned that Compaq still contains too many of the DEC people that drove away all of DEC’s talent before THAT takeover. At least I hope that’s what the plan is. I’m guessing that the first sign that they’re on the right track would be cutting a significant portion of the combined company’s PC division within 6 months of closing the merger. The other problem I see is combining all the “little things”. Jornada V. iPaq. OpenVMS? Alpha? Digital Unix? (I refuse to say “Tru64”) HP now has a server line that covers at least 7 OSes and as many system buses, each of which still has customers using them. These little squabbles could very well distract them from the main goal. I’ll close by saying that this is all my own opinion, I’m not privy to any info that isn’t on the news wires.