Analysts question HP & Compaq marriage

Global opinion on HP's impending takeover of Compaq will not make pleasant reading for the emerging IT colossus. Industry analysts are predicting tough times ahead.

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By  Rob Corder Published  September 4, 2001

An instant straw poll of global opinion on HP's impending takeover of Compaq will not make pleasant reading for the emerging IT colossus.

With both companies already baring the brunt of a US-led tech slowdown, analysts are questioning whether the timing, or even the strategy, is right.

“It really doesn't make any sense. It will be a big distraction for HP,” said Ashok Kumar, a US Bancorp Piper Jaffray analyst, in a Bloomberg report. “This will probably not go down as a good acquisition.''

"There are so many overlapping units, and there is no complementary benefit," Kumar continued in a Cnet.com report. "The problem with HP is that they have a lot to deal with, and it is going to be really tough."

Dan Niles, a Lehman Brothers analyst, tried to make some sense on how to value the new HP. In his view, it would all depend on how well the integration is handled. “Conceptually, it makes sense -- the question is in the execution,” he said in a CNN.com commentary. “You can't just take the market shares of both companies and add it together.''

Analysts are unanimous in questioning the overlaps between the portfolios and personnel of HP and Compaq. This, they argue, is certain to lead to headcount culls. Ian Bertram, for example, a regional director at Gartner Group in Singapore, said he expects more job cuts to come after the purchase, because the two computer makers will have many duplicate positions.

HP’s takeover of Compaq is designed to create an IT services superpower on a par with IBM. Gartner’s Bertram, however, believes this is not a foregone conclusion. “Compaq bought Digital for services,” he reflects. “They haven't made a particularly good showing of services. Now HP buys Compaq -- how much baggage is going to come with this?”

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