The proposed Hewlett-Packard merger with Compaq is creating confusion in the marketplace particularly for customers unsure about what the deal means for them.
Senior IT executives in Australia told Computerworld the deal between HP and Compaq has de-motivated both company's sales teams and both teams are losing visibility in the marketplace because they are not pitching for new business.
Vendors like Sun Microsystems and Sydney-based e-commerce software developer and integrator Axis believe the merger has forced HP and Compaq out of contention when pitching for new business.
Sun Australia managing director Jim Hassell said that generally the two companies have become insular since announcing the proposed $US25b merger in early September. "They seem so internally-focused that they've moved away from the market," he said. So much so that HP and Compaq have not been as visible as in the past in pitching for new business, he claimed. "We're not seeing [HP or Compaq] in as many pitches these days," he said.
Hassell believes the proposed deal was flawed from the outset, the most "confusing" point being that it was the merging of "two competitive companies with competitive product sets".
The marriage, he said, lacks any real synergy. "One would think that you'd have a clear set of product lines and synergies in a merger, but you can't see this with HP and Compaq.
Hassell said the HP/Compaq sales force faced some fundamental marketing problems, mainly how its sales representatives would tackle the issue of "where the [merged] company was going now," and how they would articulate this to investors.
Axis managing director Richard Lord said there was healthy market demand for products and services from both vendors, given that most enterprise customers were going through a state of change, re-engineering their IT systems "in time for sales drops". However, in the competition to attract new clients for application development work in particular, Compaq and HP were invisible in the pitching process.
Lord believes that IT executives are indeed "curious" about how HP's acquisition of Compaq will impact them as end users.
"Irrespective of whether or not the deal goes ahead, CIOs and the like still have to deal with HP and Compaq gear, and those at the coalface will still need solutions to help them in their job." However, some of his own clients, whom he declined to name, "were not getting any clarity or decisiveness" from either vendor as to what the merged company's support model would look like.
Sun's Hassell shared Lord's view, asking: "Which products and services will HP and Compaq be committed to supporting once they merge? Will it be just parts of their product line or all of it?
"HP and Compaq will struggle with these sorts of issues with customers."
Commenting on the overall weaknes of the proposed merger, Lord said that traditionally Compaq had "never been seen" as anything but a technology and hardware company. The merger with HP was clearly Compaq's attempt to become a solutions company by adding a consulting arm through HP. "You can't just be a box-mover any more," Lord said.
Meanwhile, Hassell said Sun was "not worried" about the news of the acquisition, but noted it gaveSun the opportunity to shine as a competitor.
"Our technology is based on the smart chip and the Solaris [platform], and we've just refreshed our whole product line to get it ready for the 'next generation' stage of [computing]," he said.
Responding to Sun's comments, a Compaq Australia spokesman said that Sun was entitled to its own opinion, adding that if Compaq were in Sun's position now, "it would certainly be saying the same thing".
The spokesman maintained that HP and Compaq would continue to operate as separate competitors until the proposed merger was approved by US and European regulatory authorities and shareholders, a decision expected to be made in the second fiscal quarter next year.
Hewlett-Packard Australia would not comment for this story.
Merger seen as defensive move
Gartner said that rumours of the sales forces of Hewlett-Packard and Compaq becoming demotivated came as little surprise, as during times of change people tended to become less motivated. On the other hand, HP and Compaq's sales reps could see the change as an opportunity, and with "all bets off for now", employees from both camps may use this time to be more motivated and remain in their jobs, the analyst said.
Brian Gammage, a US-based principal analyst at Gartner Dataquest, shot down the notion of the proposition, calling it "a defensive move by two struggling management teams who are looking to find a position in the computer industry".
"They are putting together two companies that aren't complementary to protect their falling margins and to reinforce their existing market presence," he said.