News Review: HP bid to merge with Compaq
Death of Compaq, as HP tries to swallow up the company that never understood mergers. I suspect a pro-Intel conspiracy.
The biggest merger in IT history ? A seminal time for IT corporations ? Madness ? You decide. Whatever your views, I am sure you will agree that the proposed takeover of Compaq by HP is risky, to say the least.
Firstly, there is the size of the two organisations. Up 'til now, the best company for implementing this type of merger was Computer Associates. I well remember working for ASK Ingres when the CA stormtroopers marched in. Whatever you say about them, CA were slick, and they knew how to take over companies. But, to my eyes, HP does not have the same track record. Certainly Compaq doesn't. All in all, large mergers do not usually work.
Secondly, there is the question of cultural difference. What about the amalgamation of Compaq with Digital Equipment (DEC) and Tandem ? Even years later, I still meet people who think of themselves as more DEC people than Compaq people. Hardly an industry success story. Creating a new culture involves more than just merging the Management Accounts and spending millions of dollars on a new logo which no-one likes.
Thirdly, and most importantly, where are the economies of scale or shareholder value ? Both companies have similar lines. On the Unix side, this clearly spells the end of TRU64, as previewed earlier this year. In market after market, whether it be for PCs, Servers, printers, PDAs or storage, they have duplication of lines. Some very hard decisions will need to be taken: HP-UX over TRU64, iPAQ over Jornada, StorageWorks over HPStorage ? The only real advantages for HP are that Compaq has a reasonable Services and Consultancy arm.... and that taking Compaq out of the fight helps preserve market share in a Darwinian world.
Conspiracy Theory
When you look at the announcements from Compaq over the last year, one is very tempted to see a very skillful bit of manipulation by the Compaq CEO.
Firstly, there was the partial sell-off of the crown jewels in March (see Compaq License Tru64 Clustering Technology to Oracle. In return for an undisclosed sum, Oracle gain ready-made clustering for Oracle 9i. But does this signal a change of direction for Compaq's Unix Strategy?).
Then, on 25 June, we saw the decision to drop the Alpha processor in favour of the Intel technology (see Compaq drops Alpha in favour of Intel. Appears to be a serious cost-cutting exercise. The end of VMS ?). This had major implications for TRU64 Unix, VMS, and for Himalaya non-Stop technology.
All in all, we see an desperate CEO trying to make his company attractive to a purchaser. I smell a conspiracy. Compaq have not so much been taken over, as committed suicide.
Will it work ?
Whatever may be said about Carley's ambitions, this is a big one. Having lost the chance to buy a consultancy firm, she then decided to take a lead on the consolidation of the market, buy taking out 30% of the opposition in one transaction. That's fine, but there is more to a merger than getting rid of 15,000 staff. Can she bring off the biggest merger in IT history ?
Only time will tell.
Reviewed by Dennis Adams in September 2001