Message Boards Fan Rumors
Of a Compaq-Hewlett Merger
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
Rumors of a merger between Compaq Computer and Hewlett-Packard are generating considerable excitement on Internet message boards, but industry analysts and the companies aren't giving much thought to such talk.
On a Silicon Investor message board (www.siliconinvestor.com), participants have even started a guessing game on how much H-P, rumored to be the buyer, will pay for Compaq.
The speculation comes on the heels of Compaq's annual briefing for Wall Street professionals last Friday, in which executives outlined plans to shore up the company's unprofitable corporate personal computer business.
Compaq, which is based in Houston, is the world's No. 1 personal computer maker. H-P is the second-biggest computer company overall behind International Business Machines.
"It's nothing but rumor or speculation, our policy is we don't comment on it," says Alan Hodel, a spokesman for Compaq. A spokeswoman for H-P, of Palo Alto, Calif., also declined to comment.
Mr. Hodel says such merger rumors aren't new.
Analysts say they too have heard such talk before. They downplayed the possibility of a marriage between the two companies, saying it just wouldn't provide any significant benefits.
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"I'd put a 1% probability on it, it absolutely makes no sense," says Charles Wolf of Warburg Dillon Read LLC. "There's a huge overlap in the product portfolios of the two companies, I don't see where there's any synergy."
But the speculation is getting much more attention among online investors. One poster on a Yahoo! Finance message board (quote.yahoo.com) believed it enough to get a jump on Compaq stock.
"I just sold HWP and bought CPQ because I think HWP will buy CPQ ... I hope HWP doesn't slide too much, it could impact the takeover price," the poster wrote, referring to the companies by their stock-ticker symbols.
But Walter Winnitzki, an analyst with Chase H&Q in San Francisco, says Compaq would be a difficult target to swallow.
"There is so much going on at Compaq right now, a lot of balls are up in the air. It could be very difficult for any company to get their hands around," he says.
Compaq has been hard hit in recent quarters by competitive pressures in its commercial PC business from other PC makers like Dell Computer and Gateway that sell PCs directly to customers.
But Compaq's Chief Executive Michael D. Capellas told Wall Street professionals that the company is taking steps to fix its corporate PC problems and boost other areas, such as big-computer services and sales.
On Wednesday, shares of Compaq fell 1 1/4 to 27 1/4 on the New York Stock Exchange. H-P rose 4 13/16 to 110 5/8.
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