HP/Compaq merger aftermath
Hewlett Packard's sorry results of the past quarter are based on the main area where its 2002 merger with Compaq was supposed to help it, namely in computers servers and storage. And it's not that that sector is fundamentally bad; after all, Dell showed strong growth in those same areas.
As a New York Times article ("Just Don't Say 'Synergy' to a Hewlett Investor", 8/15/2004) reminds us, the merger was the source of a bitter battle within HP, a bit less than half of whose stockholders saw no upside to the expensive takeover of rival PC maker Compaq. The term of art, as it often is, was "synergies," but those are sadly lacking. Some think that the prolonged assimilation process allowed Dell to get a jump both in marketing and in technology.
In fact, the larger size may well be the reason for the slowdown in innovation at the new HP. The Times article quotes one analysts as saying "You can substantially more than double the complexity of a technology business by doubling the size. Sales can be lost, pricing can be sacrificed and integration can be less than elegant." It's clear that the companies problems are not with the lucrative printer division, which was untouched by the merger, but with the areas where the Compaq expertise in enterprise computing were supposed to help the company.
And the suspicion is that the acquisition was not, in the end, for the benefit of the shareholders. As the article puts it, "Chief executives love mergers because they result in enormous personal paydays. What's more, the executive charged with running the combined company also gets all the perquisites associated with heading a larger operation."
10:42:26 AM 
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