HP/Compaq Merger:  And Now . . .

In case you’ve been on an extended vacation on Mars, you may have failed to notice that (a) there has finally been a vote on the HP/Compaq merger and (b) it was probably too close to call, but HP did the expected thing (it’s what companies normally do in this situation) and declared victory.  The official outcome will probably take at least a few weeks since the vote-counters (this is a human labor process, counting little white and green proxy cards) must alphabetize and date order everything, to accommodate voters who change their minds and votes.

We’ve said all along that the real question might not be would HP win the vote, but rather could HP manage the execution of the mammoth integration ahead of them?  Let’s assume that the office vote confirms the merger.  HP must then:

Rationalize the staff and product lines of HP and Compaq, eliminating overlapping products and redundant positions to get the cost savings (projected at $2.5 billion) that are a major justification for this deal.

Not loose too much business in the process.  Going in, Carly Fiorina’s team predicted the overlap loss would be about 5% of combined revenues.  More recently, industry sources have predicted it might be more like 10-15% which could completely overwhelm cost savings.

Quickly take advantage of HP’s new scale and #1 or #2 position in important markets to gain attention and revenue.  This is the real trick.  If HP can do this, nothing else will matter; if they can’t it isn’t going to work.

Keep the customers happy while all of this is going on, in spite of the fact that some of them are going to be asked to substitute products they didn’t choose for products they previously selected.  IBM, Sun, and others are eagerly anticipating the possibility of some big wins here.

Change the mood at HP so that HP employees can see the logic of the merger and what their new roles are going to be.  Once they’re busy working at the new game plan, they’ll have much less time to fret about how it used to be.

Of course, it’s just possible that the vote won’t confirm the merger.  In that case, we’d guess that Compaq might be smart enough to look at what was going to happen in some part of that integration plan and build its future based on what it now knows about its strengths and weaknesses.  It might decide, for instance, that continuing to build desktop PC’s is a waste of time or that further resources spent on the Alpha platform can’t pay off.  HP, on the other hand, will have to go back to square one and start rethinking itself as a company.  A different kind of company, we suspect.  

It’s going to be a long three weeks for those whose futures hinge on the final outcome.

(back to top)