If the U.S. Department of Justice and the European Commission approve the planned merger between Hewlett-Packard Co. and Compaq Computer Corp.-- and that's a big if, since the EC squashed the planned nuptials between General Electric and Honeywell earlier this year, citing antitrust concerns -- what's the upshot for corporate customers of both companies?
They'll get, for starters, a bigger services company that can, perhaps, compete more effectively with IBM and other consulting heavyweights. (The combined HP/Compaq services business will boast 65,000 services professionals vs. 100,000-plus for Big Blue.) And while the HP/Compaq merger is expected to bolster the beleaguered stock of the combined company, corporate customers might find themselves dealing with a lot of headaches. Here's why:
Impact on customers with redundant equipment. HP and Compaq both offer a similar mix of PC, server and storage equipment, both through their respective lines and as a result of Compaq's earlier acquisitions of Tandem and Digital Equipment. Once executives from the combined company scour through customer data to determine which are the most profitable product lines to support, you can be sure that the other company's corresponding products will either receive less support, won't be upgraded as aggressively or will be outright discarded.
Support. This is a massive merger between two big companies. While HP's Carly Fiorina is hopeful that the combined entity will be able to compete more effectively against IBM, EDS and others in the higher-margin services arena, customers have to question whether and to what extent the new HP will take its eye off product and customer support while it goes through the arduous task of absorbing Compaq's operations.
Sales channel disruptions. In many mergers, sales forces are often realigned by vertical industries or product lines. On top of that, competitors often lure away top performers. So, whether you're a Compaq or an HP customer, you should ask yourself and your sales rep how this merger will affect your relationships with the company for products and services. To that end, what will be the channel/distribution strategy for the merged company?
Impact on Tandem and Digital customers. Chances are, the HP/Compaq merger doesn't bode well for this group. After Compaq acquired Digital, company officials insisted that support for Digital's VAX machines would continue indefinitely. But after Compaq milked the VAX customer base for profits, the company swiftly announced in August 2000 that it planned to retire the VAX line.
Tandem's Himalaya customers have to be wondering where they stand going forward with the new HP. Will this deal accelerate the demise of Alpha? How will this hit proprietary systems like the OpenVMS and HP 3000 platforms?
Here are a few more questions to ponder as details of the planned deal emerge:
Which company's Unix strategy will prevail? Will the merged company support both Compaq's Tru64-Unix and HP's HP-UX? Will Tru64 be ported to HP-UX or vice versa?
By further consolidating the server market, who can best check Dell and IBM on server pricing? Will fewer competitors make it easier for the survivors to raise hardware and software licensing fees?
And finally, how will the merger impact product road maps for both companies?
Computerworld reporters Jaikumar Vijayan and Marc Songini contributed to this column.