Duke -
OK, let's take this thing seriously for a moment -
HP has no very high end line - nothing to go after Tandem Himalaya or IBM S390. Their services are OK but weak and overstrained. Their Unix line is well regarded - a probable keeper - but has shown signs of weakness recently, partly due to the need to keep PA around after Intel dropped the ball. Their PC business is me-too but they have decent share. They are the only other major player working the consumer segment.
CPQ has a solid top-end with Himalaya - it is clearly the best high-reliability system with nothing in second place. But it also has saturation of core market, with something like 70% of that class of business, so growth is limited. HP could probably bridge from the top of their current line to the Himalaya more effectively than CPQ has done. Also, Tandem is right across the street from HP - literally, the buildings face each other - so there is little infrastructure hit. HP might even make effective use of space at the Tandem facility as they can hardly expand their own Cupertino facilities.
CPQ's upper end Unix products are technically strong but have weak market share. If we use the "top 3" rule - if you can't be in the top 3 get out of the business - then CPQ will eventually get out, since Tru64 is unlikely to displace Solaris, AIX or HP-UX. Unlikely is too kind, they will never do that.
CPQ also has the legacy VAX business - a solid cash cow with a loyal customer base but little prospect of growth.
CPQ and HP share a need to move more of their business direct - not just the PC business but also the low end of the enterprise stuff. Doing that well requires a strong service organization since the channel will not be there to make the stuff go. CPQ is farther along in both infrastructure and business planning than HP in that regard.
HP also has a range of other businesses - the printer business, and a bunch of odds and ends - which would complement some of CPQ's new initiatives.
A combined company would have sales of about $80B, a commanding market share from top to bottom, and the potential for some serious cost reduction...
I'll take $100 a share any time.
But still, this seems like a pretty big stretch. |
