Hi Kemble,
Thought you might like this report,
Sun see rivals gaining from HP-Compaq merger
September 05, 2001 07:25:00 AM ET
By Jennifer Tan
SINGAPORE, Sept 5 (Reuters) - Hewlett-Packard's (HWP) acquisition of Compaq Computer (CPQ), the computer industry's biggest ever merger, may benefit rivals in the short term, a senior Sun Microsystems executive said on Wednesday.
"There will be at least 12 to 18 months of confusion at the merged entity and Dell (DELL) has the opportunity to capture more market share," said Lionel Lim, Sun Micro's managing director for South Asia, referring to the world's current number one personal computer maker.
HP is taking over Compaq in a US$20.3 billion stock deal as the two industry giants seek to cope with the protracted downturn in computer sales. The combined entity would have $87.4 billion in revenues, rivalling industry leader IBM (IBM).
"Their customers now have to figure out what to do (during the merger), and it will be a very trying period of uncertainty for them -- I see them giving up," Lim told a news conference.
And customers will be among the biggest losers in this deal.
"They bought PCs on the assumption that prices will fall due to stiff competition but now, it's getting to the point of a cartel-like industry and in this situation, customers don't benefit," he said. "It looks like the fierce PC price war will be controlled."
A price war has been raging among leading PC makers, with Dell taking the lead. The company's direct-sales model allows it to pass on lower component prices to consumers and slash prices to seize market share.
"What this (merged) company is going to go through is very gut-wrenching indigestion," Lim said.
"There are many (technological) architectures that have to be rationalised, a lot of investments that were put into the industry in the past will have to be written off, and we're going to see a loss of many good employees and talent."
Analysts have said HP-Compaq would face some serious challenges in creating coherent strategies for their server and storage architectures, operating systems and service businesses.
"With the uncertainty that will dog the merger in the near term, I would expect competitors to benefit and market share would go to Sun, IBM and Dell," Davina Yeo, International Data Corp Asia Pacific research manager told Reuters. REUTERS
© 2001 Reuters |
