HP-Compaq deal brings opportunity for competitors

With Hewlett-Packard Co. (HP) and Compaq Computer Corp. focused on merging, the competition could jump in and take away customers, said two competitors.

Fujitsu Siemens Computers BV, itself the result of the merger two years ago of Siemens AG's Computer Systems division and Fujitsu Computers Europe Ltd., said the takeover of Compaq by HP is something that could backfire on both companies.

"We don't see competition becoming stronger in the short term. In the post-merger phase they (HP and Compaq) will be quite heavily internally oriented, which offers opportunity for the competition," said Barbara Schädler, head of corporate communications for Fujitsu Siemens.

The takeover of Compaq by HP surprised Fujitsu Siemens, even though rumors had been making the rounds for some days, according to Schädler, who called the news "exciting for the whole market."

For HP and Compaq customers the merger brings uncertainty, said Schädler.

"Nobody knows what the impact will be on the product portfolios. What is the added value of the merger? Both companies are very hardware oriented, there is a lot of overlap in the products," she said.

A representative of Sun Microsystems Inc. agreed with Schädler, saying that the takeover of Compaq will create "a lot of confusion in the marketplace."

"It will take about 12 months to get the merger passed through the regulatory bodies and other institutions. Customers and the companies, in the meantime, can't plan ahead, because the merger could still fall through. Furthermore, staff morale will be quite low as there will be a lot of layoffs," said Jonathan Mills, a product marketing manager with Sun in the U.K.

"HP and Compaq will have to make two and two equal five, as you only merge to create added value. It will take several years for them to do that and there are even doubts whether they can make two and two equal four. The merger will help Sun," he added.

For users, the merger could mean a strengthened product range, but raises the worry of PC prices becoming less competitive, said one HP and Compaq customer.

"The product offering will be as wide. The quality might even be enhanced, having the best of both," said Alex Obolensky, a spokeswoman for PeoplePC Inc., a customer of HP and Compaq, which runs employee PC programs for companies in Europe and the U.S.

PeoplePC typically sends out requests for price quotes to Compaq, HP and IBM Corp., said Obolensky. Now a new supplier may be added.

"While this merger reduces competition and our choice of OEM (original equipment manufacturer), it does reinforce a commitment by HP to its PC business in Europe and worldwide. It is not inconceivable that we will be asking for quotes from other parties if the merger produces noncompetitive pricing," said Obolensky.

HP and Compaq did not specify what will happen with overlapping product lines, such as PCs and servers, in their announcement of the merger. HP and Compaq staff declined to comment, and referred to the news conference scheduled for later Tuesday.

IBM, Dell and NEC Computers Inc. representatives also declined to comment on the news.

Fujitsu Siemens is the fourth largest PC vendor based on shipments in the Europe, Middle East, and Africa (EMEA) region, according to research firm International Data Corp. (IDC). Compaq is the top seller, followed by Dell Computer Corp. and HP.

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