Overlaps feared in HP-Compaq combine

By Our Special Correspondent

NEW DELHI, SEPT. 5. Analysts feel that the computer hardware industry's mega merger will most probably benefit only competitors. Both Hewlett-Packard (HP) and Compaq Computer have not made a convincing case for this ``defensive deal'' and may ``not live up to their past achievements by combining their assets,'' feel Gartner Group analysts.

Painting a grim picture, Gartner believes it unlikely that HP and Compaq will complete the deal. However, in case they do complete it, their customers and business associates may experience two years of uncertainties. ``This deal would likely not benefit any of them, including most customers.''

The deal would mean many overlaps that could impact the merged duo's ability to chart out a single coherent strategy for their products. The HP-Compaq arsenal now comprises four server architectures, seven operating systems, four storage architectures and several service businesses.

Facing a capricious market, the two companies precipitated the merger with the only plus point being annual savings of $2.5 billion by the year 2004. On the other hand, both companies went into the marriage without resolving the conflict between direct and indirect sales. In PCs, they would face the challenge of maintaining two brands. One would have to go, counsel Gartner analysts. The printer business, largely accounted for by HP, may benefit. In the services segment, the merger will not lead to higher revenues from faster growing services like consulting, system integration and out-sourcing. But HP-Compaq will continue to gross a substantial share of the turnover from hardware- support services.

In India too, the merger faces several challenges despite combined sales of over two lakh PCs. This combined figure extends the gap between No.1 (HP-Compaq) and the No. 2 in the Indian marketplace. Gartner believes the challenge is to retain this market share against competitors taking advantage of customer uncertainties and product discontinuities.

Job loss is another issue facing the local markets. Before the merger up to 17,500 jobs in both companies were to go but post- merger the estimates have risen by another 15,000. In the Asia Pacific region, Gartner expects that this could equate into several thousand job losses.

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