HP-Compaq Merger and Apple

  • Posted: 01 May 2002 10:05 AM

    As of today (3/3) it appears that HP’s shareholder vote to approve the HP-Compaq merger is too close to call. The merger faces fierce opposition from members of HP’s founding families and their respective foundations.

    Personally, I believe the merger of HP and Compaq would be good for the computer industry and consumers. Dell has continued to grow and grow virtually without hindrance due to the bloated cost structures of its rivals. Real innovation in the Windows consumer PC business has been stagnated by price wars and R&D cuts.

    Apple’s decision to adopt certain PC standards in order to cut costs and allocate its own R&D resources to those areas that are most meaningful to the end user has helped Apple to regain market share in key sectors of the PC business and allowed the company to regain critical mass. Apple, however, cannot go it alone in terms of development of new standards or the further development of existing standards. A healthy, competitive PC market is as important to Apple as it is to many of its competitors who are forced to cut costs in order to compete for business on the basis of price only.

    Further, although much press attention is focused on the consumer PC business, the bigger battle is for high-end systems and servers. This market, despite Microsoft’s repeated assaults, is not necessarily controlled or dominated by Windows-based systems. While many may view Linux as a competitor to the Mac OS, there are many areas in which the two operating systems may compliment one another. Continued development of Unix-based and Unix-derivative solutions can only benefit the further development of Mac OS X and the Cocoa-based application development effort. High-end systems and servers is where the HP-Compaq merger will have the biggest effect. Next to Microsoft itself, Dell is the most vociferous proponent of pushing the reach of Windows into the high-end systems and server market.

    It’s only a matter of time until the Motorola/IBM PowerPC chip technology and further enhancements to Mac OS X converge at a point that allows Apple to reenter markets it once abandoned and make forays into new, high-end markets where Apple has never had a presence.

    I believe the successful completion of the HP-Compaq merger would not only allow the combined company to compete more effectively on price, but the elimination of redundant expenses and duplicate administrative systems would provide an opportunity for resources to be applied to new product development.  A healthy, competitive PC market would not only be a benefit to computer users at all levels, it would be an aid to Apple in its efforts to bring true innovation to an increasingly moribund PC business.

    Robert

         
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    Posted: 03 March 2002 05:20 PM #1

    DT, I think that the HP-Compaq merger is going to mainly accomplish turning two US$40 billion companies into one US$55 billion company.  the difference will likely go to Dell, and the resulting Megacorp will STILL not be able to compete with Dell.  Dell is making toasters (computers as a commodity), and HP-Compaq are hopelessly behind in that game.

    I think that the merger will benefit Apple in that there will be one less company against whom to compete, but I am not sure there will be other benefits.

    Great topic, BTW!

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  • Posted: 04 March 2002 04:10 AM #2

    One of the real winners of the Compaq/HP merger would be Linux. HP is already marketing a Linux-based desktop.

    At first, I thought this was a crazy idea, but now, given the market condition, it should be a good thing. Dell is crushing competition… this merger might help check their expansion.

    In regards to how Apple will benefit, I guess to an extent some things will help them, but not a lot. I keep hearing how Microsoft (and all of the associated companies in the pc market) are not ‘innovating.’ Microsoft may not have an iMac, but they are innovating. .Net is a powerful technology, and Apple has not signed on to support it. Also, Intel and AMD are making PCs faster and faster… 2 Ghz + processors, 400 Mhz front-side bus, slick DDR RAM. I saw for the first time this weekend, a 1.6 Ghz laptop from Toshiba. In addition to the framework innovation, don’t forget that PC component prices are coming down all the time, and the bang for your buck is increasing: 40GB 7200 RPM hard drives for under $100.00 as an example. No, Microsoft’s products are not sexy, they are not always good for the PC industry, but they are different and innovative. Some say Windows XP is the single greatest consumer technology ever… I don’t agree, but this is felt by many.

    Apple needs to come out with some faster processors, drop the G3 entirely, equip all new hardware with a minimum of 256 MB RAM and drop the prices of their PowerBook and PowerMac lines.

    Just my opinion!

    Mitch Featherston

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  • Posted: 04 March 2002 10:38 AM #3

    As far as I know, no merger of this scale is ever successful in the short-term. Eventually, things will straighten out, but I believe customers, not to mention employees, of both HP and Compaq are in for some real turmoil.

    Tons of people will be laid off of HP-Compaq. Management transitions will effectively disable HP-Compaq for many months, if not years. Engineering and R&D will be Dilberted while marketing tries to figure out a coherent message.

    Apple will likely benefit from this chaos. A hogtied opponent is easy to win against. That means Apple’s remaining competitors in the desktop arena will be Dell, and IBM.

    The only Mac products that will be directly affected by this are HP printers; hopefully HP management will have the sense to insulate that division from the goings on in the desktop and server product divisions.

    <font size=-1>[ This Message was edited by: Mr.T on 2002-03-04 18:47 ]</font>

         
  • Posted: 04 March 2002 09:05 PM #4

    Here’s the fun Part: What name will the company have?

    Okay, to start it off, what about:

    Hew-Paq?

    Com-pacqard?

    Hewlett-My-People-Go?

    Hewlett-The-Dogs-Out?

    <font size=-1>[ This Message was edited by: DawnTreader on 2002-03-05 01:26 ]</font>

         
  • Posted: 05 March 2002 03:18 AM #5

    On 2002-03-05 01:05, Anonymous wrote:
    Here’s the fun Part: What name will the company have?

    How about “Paq-Hew”? (Say it out loud.)

     

     

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  • Posted: 19 March 2002 05:31 PM #6

    This evening (3/19) HP’s management is claiming early victory in the bitter proxy fight to acquire Compaq HP Claims Victory in Compaq Merger Vote . If the proxy tallies continue to fall management’s way, I expect computer hardware stocks to trend higher because a big cloud of uncertainty has moved off the industry. Apple and other technology stocks moved higher in after hours trading today. HP management’s claim of victory may help AAPL and other major technology stocks open higher on Wednesday morning.

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    <font size=-1>[ This Message was edited by: DawnTreader on 2002-03-19 21:33 ]</font>

         
  • Posted: 20 March 2002 03:46 PM #7

    While HP’s well organized opponents of the HP-Compaq combination have yet to concede defeat in their bitter proxy fight to stop the deal, Compaq’s shareholders (on 3/200 approved the deal in less than one hour   Compaq Shareholders Approve HP Merger

         
  • Posted: 28 March 2002 07:10 PM #8

    Walter Hewlett, heir of the HP co-founder, has filed suit to stop the HP-Compaq merger that has apparently been approved by HP’s shareholders with a margin of less than 1% of the vote.

    Walter Hewlett Continues Fight .

    The lawsuit follows public announcements to employees of HP and Compaq by executives of both companies that the operational merger of HP and Compaq will be delayed until weeks after the formal merger date in early April.

    Mr. Hewlett led the charge against the merger and continues his fight into Delaware’s corporate court. Delaware is the state of incorporation for many of America’s largest corporations because of its relatively liberal corporate laws.

         
  • Posted: 01 April 2002 09:58 AM #9

    The HP-Compaq merger, according to early tallies, has been approved by the slimmest of margin by HP shareholders. Following Carly Fiorina’s early claims to victory in the bitter proxy fight to approve the merger, dissident director Bill Hewlett, heir of one of the company’s co-founders, filed suite in Delaware to stop the merger claiming HP’s management bought votes from large shareholders in the final days before the special shareholder meeting.

    Unrelated to the suit or the wait on the official shareholder tally, HP and Compaq have notified employees that the operational integration of the two firms will be delayed for weeks beyond the formal merger date early this month. HP and Compaq are now embroiled in an almost worst-case scenario following the apparent razor-thin approval of the merger.

    Mr. Hewlett’s suit, delays in the final certification of the shareholder vote and a re-calendaring of the operational integration of the two companies leaves customers, shareholders and employees in limbo. Experts believe the HP-Compaq merger will reduce the payroll of the combined company by about 15,000 workers. Concerned for their jobs, HP and Compaq employees are less apt to be focused 100% on their customers and the successful integration of the two firms.

    Should the Delaware court rule in favor of HP’s management in Mr. Hewlett’s suit, I would expect him to drop further challenges to the merger and work as an heir to a cofounder and toward a mending of fences with HP’s management. His best role following the merger is to showcase what has been called the “HP Way”. A style of doing business that respects the contributions of all parties and where possible, seeks consensus. If shareholders have indeed approved the merger, if even by one vote, it’s time for all parties to work toward the successful integration of the two firms. Further delays only benefits pre-merger market leader Dell and hurts all employees of the two firms and the communities in which they live.

    Apple IMHO has an opportunity to take advantage of the HP-Compaq difficulties by remaining “on task” and working to increase the supply of iMacs in the market. I think it will be awhile before the post-merger HP has a chance to focus and real attention on the consumer market.

         
  • Posted: 09 April 2002 09:32 AM #10

    The Delaware court will permit Walter Hewlett’s suit to stop the HP-Compaq merger to proceed. Mr. Hewlett claims the company used unfair practices to entice large shareholders to support the merger.

    Judge: Hewlett Suit May Proceed

         
  • Posted: 28 April 2002 01:38 AM #11

    On Friday (4/26) a new slate of directors was approved by HP shareholders. For the first time in the company’s history, a member of the founding families is not on the board. Walter Hewlett was removed from this year’s slate of directors by HP’s management in response to his lawsuit over the outcome of the merger claiming HP’s management had illegally bought votes.

    A decision in the case is due Monday or Tuesday. The Street expects the Delaware court to rule in HP’s favor.

         
  • Posted: 28 April 2002 10:14 AM #12

    Here’s an interesting look at the HP court case from the Chicago Sun-Times.

         
  • Posted: 01 May 2002 10:05 AM #13

    The path has been cleared for the largest computer industry merger in history

    For HP, Compaq, court victory marks big step

         
  • Posted: 03 May 2002 10:39 PM #14

    The HP-Compaq merger is now complete in terms of the legal combination of the two firms. On Monday HP will begin trading under the ticker sumbol HPQ and shares of Compaq will no longer trade.