The New HP: Does Bigger Mean Better?

Saturday Dec 1st 2001 by SmallBusinessComputing Staff
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As if there weren't enough happening in the technology sector to raise business concerns, now two major players, Hewlett-Packard and Compaq, are merging. We already know that the Compaq brand-name will be phased out, but the long-term effects of such mergers are rarely clear. The September 4 announcement has analysts, technology manufacturers, business owners, and consumers speculating on just what it all will mean.

By Tom DiNome

As if there weren't enough happening in the technology sector to raise business concerns, now two major players, Hewlett-Packard and Compaq, are merging. We already know that the Compaq brand-name will be phased out, but the long-term effects of such mergers are rarely clear. The September 4 announcement has analysts, technology manufacturers, business owners, and consumers speculating on just what it all will mean.

Rob Enderle, a research fellow with Giga Information Group, says that businesses should expect PC prices to fall. "The easy argument from any competitor is, Compaq is going away, buy me,'" Enderle says. "So Compaq has to come back with something and their only real response is price, saying, Trust us, we're going to be around. But just to keep you on board, we're going to give you this extra discount.'"

Martin Reynolds, a research fellow at Gartner Dataquest, takes a different view. "Compaq has wanted as much marketshare as possible and kept the prices a bit lower [than HP]," Reynolds says. "My feeling is with the merger, they'll probably go the HP way and pull prices up a little bit, with the intent of yielding a little marketshare but improving profitability."

What about other manufacturers? One market leader, Dell, doesn't expect to change its strategy to respond to the merger. "What [customers] can expect from us is continued aggressive pricing," says Mike Maher, a Dell spokesperson. "We'll just continue to do the same things that have made us successful so far."

Despite the impending merger, Compaq is not standing pat. In late September the company announced a series of networking and service packages aimed at the home and small-business market.

Both HP and Compaq have performed poorly recently, and Giga's Enderle predicts the market will continue to consolidate because it can't support the current number of vendors.

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