HP/COMPAQ: Users, analysts more positive to merger

Reaction to the proposed merger between Hewlett-Packard and Compaq has slightly improved five weeks after the deal was announced.

That's according to several users interviewed at the Gartner Symposium/ITxpo here, as well as several Gartner analysts who blasted the deal days after the Sept. 3 announcement.

Even the CEOs of the two companies, HP's Carly Fiorina and Compaq's Michael Capellas, acknowledged in keynotes and interviews at Stamford, Conn.-based Gartner Inc.'s annual conference here that the reaction has been overwhelmingly negative and sought to improve the public's view.

One IT manager said today he had an improved impression of the deal and its impact on his business after hearing both CEO keynotes and an improved analyst assessment in a packed session of users .

"My view of this deal is improved mainly by seeing Carly Fiorina," said Robert O. Graham, chief technical officer at Infocrossing Inc., an outsourcing company in Leonia, N.J., that provides co-location services and expects to be a server customer after the HP/Compaq merger. "She's obviously a leader, and she really understands the factors involved in the business process," he said.

Graham said that his company is an IBM customer today but that he was favorably impressed by the technology and other plans the two companies described for the new entity. "The merger is a high hurdle, but they'll solve it," he said.

Clifford E. DuBord, another IT manager who works at a privately run nuclear power facility in Lycoming, N.Y., for Niagara Mohawk Power Corp., said seeing both CEOs convinced him that "the deal makes good business sense."

But DuBord said that he was a Digital Equipment Corp. customer when DEC was purchased by Compaq and that it took his direct involvement to get attention from Compaq service representatives two years ago. "That's something I'm not interested in having happen again," he said. He is a supervisor of nuclear information management, serving about 1,300 workers at Niagara Mohawk.

Sitting through a session of advice from Gartner analysts, DuBord said afterward that he was convinced he should move his company away from Compaq's Tru64 server platform and over to the HP/UX platform. He said he was still unconvinced that service performance by the new entity would be very good.

Gartner analysts also advised users to extract discounts on either HP or Compaq service contracts until the deal is approved, something DuBord definitely plans to do. "I'm going to put my systems administrator outsourcing contract with Compaq up for bid, for sure," he said. Niagara Mohawk pays US$600,000 per year for around-the-clock systems administrator assistance, which can probably be reduced, he added.

Another IT manager, John Turner, a manager for the data warehouse at Nextel Communications Inc. in Herndon, Va., said he found Capellas "much more insightful" about technology than Fiorina. "She kept saying she wasn't going to blow the integration, but how? I didn't get the specifics," he said. Turner and other managers said they enjoyed seeing Capellas dance the mamba with a Gartner analyst on stage, in a literal demonstration of the dancing that his company and HP will have to do.

Gartner analysts also told one IT manager who is planning to buy 70,000 laptops in the next five years that it would be OK to buy either HP or Compaq machines, since either will be good and will be supported, regardless of what happens with the merger or the separate product lines. The user wasn't identified in a question-and-answer session.

Martin Reynolds, one of the analysts who gave that advice, was highly critical of the deal in early September and said today that users are still "very unsure and uncertain," but he added that the new company "will take care of them, believe me."

Reynolds and analyst Paul McGuckin said the deal will likely be approved, probably in the February to April time frame. Shareholders upset by the proposal have probably already sold their stock, and government approvals are likely, they said.

"We had a strong negative rating on this merger when it was announced and now have ... moved past neutral, and we're probably two inches into positive territory," McGuckin said.

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