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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hlpinout who wrote (94424)	12/22/2001 6:20:39 AM
From: hlpinout	Respond to of 97611

Combat Escalates No Cease-fire in sight for HP-Compaq merger squabbles By Edward F. Moltzen CRN New York - 3:37 PM EST Fri., Dec. 21, 2001 The tit-for-tat exchanges between sides favoring and opposing the planned $20 billion-plus merger between Hewlett-Packard and Compaq Computer are continuing unabated. HP has yet to schedule a vote for shareholders to either approve or reject the proposed merger, while HP Chairman and CEO Carly Fiorina and others continue to actively campaign for support. Walter Hewlett accused a pro-merger HP board member of threatening to quit if shareholders reject the deal. Part of that campaign has involved responding to recent charges leveled by HP board member Walter Hewlett, the son of one of the company's co-founders, who is fighting the merger. Last week, Hewlett made public a letter from his lawyer to HP lawyer Larry Sonsini accusing pro-merger board member Richard Hackborn of threatening to leave HP if shareholders reject the proposal. Stephen Neal, Hewlett's lawyer, cited an interview Hackborn gave in which he said HP stockholders would "have to get a board and management to fix the PC business and these other problems" if they rejected the deal. "The threats can no longer be ignored," Neal told Sonsini. "This type of threat by a member of the board or management of any company,and particularly a company like Hewlett-Packard,is shocking." In a response letter, Sonsini countered, "Your speculation about what a Hewlett-Packard board member might do pending the outcome of the merger vote is just that,speculation. Any assertion that a Hewlett-Packard director or member of management is making a threat to resign or has made a decision to do so is incorrect and misleading." The exchanges,which have lasted for several weeks,drew pleas from some solution providers to stop the mudslinging. "No m%E1s! Please!" said one solution provider, who requested anonymity but whose company is a large partner of Compaq and HP, in response to the latest volleys. Kevin Kistner, vice president of Open Systems of Cleveland, said that because his company has a variety of partnerships, his business won't be hurt regardless of whether or not the merger happens. "It doesn't leave us any holes in our product line," Kistner said. "Compaq, Intel and HP,no matter what way it swings, we're in good position." But not all involved parties believe they will find themselves in good position, including a number of HP employees who fear massive post-merger layoffs. According to an HP filing with the Securities and Exchange Commission last week, Fiorina met with top managers and tried to address concerns over employee angst, telling them to "look [their] people in the eye" when talking about the merger.

To: hlpinout who wrote (94424)	12/22/2001 6:21:08 AM
From: hlpinout	Respond to of 97611

Compaq, Intel Team Up Seek to stake claim in high-performance technical computing arena By Edward F. Moltzen CRN New York - 6:11 PM EST Fri., Dec. 21, 2001 Compaq Computer and Intel are quietly working on a project to push Intel technology squarely into the high-performance technical computing space,a frontier Intel has long coveted. In addition, Compaq has transferred an unspecified number of its longtime Alpha engineers to Intel as part of a deal inked last summer. The company is, however, holding on to several senior engineers as it continues its own high-end technology push. The moves build on an agreement Intel and Compaq reached last summer under which Compaq agreed to get out of the chip business and essentially give Intel its Alpha processor technology, according to executives and documents provided by the companies. Specifically, Compaq and Intel said they are now embarked on a "Parallelism Technology Program" that "is chartered to research, prototype and engineer advanced high-performance technical computing technologies with selected customers." Ken Reilly, Compaq's director of Alpha compilers, tools and technology, said the computer maker has begun transferring key engineers and intellectual property to Intel for its Itanium platform. "The first projects being conducted in the [Parallelism Technology Center] are technologies that came from Compaq," Reilly said. Intel executives were unavailable for comment but provided a joint Compaq-Intel paper discussing the specifics. Success of the Itanium platform is key to Compaq's strategy to unify its entire line of servers under the architecture. But some solution providers have been less than enthusiastic about the near-term prospects for Itanium. "Until the applications get ported over to Itanium and 64-bit architecture, it's going to be a slow go," said Kevin Kistner, vice president of Open Systems of Cleveland, a solution provider and partner of Intel, Compaq and Hewlett-Packard. Part of the Compaq-Intel initiative would apparently address that concern. According to the document furnished by Intel, one of the first focuses of the joint development pact would be to create tools for writing applications for Itanium under "shared memory."

To: hlpinout who wrote (94424)	12/22/2001 6:21:37 AM
From: hlpinout	Read Replies (4) \| Respond to of 97611

Will Compaq's Focus On Dell Prove Costly? By Craig Zarley CRN Cambridge, Mass. - 6:23 PM EST Fri., Dec. 21, 2001 Compaq Computer's ongoing obsession with cross-state rival Dell Computer is causing the vendor to make strategically flawed business decisions that are damaging its relations with solution providers, a Harvard business professor said last week. David Yoffie, co-author of the business handbook "Judo Strategy: Turning Your Competitors' Strength To Your Advantage," joined a growing chorus of solution providers that contend Compaq's plan to build a direct distribution engine while at the same time trying to maintain its traditionally strong channel relationships is at the heart of its problems. Yoffie, who went public with his case last week in an article on the Op/Ed page of The Wall Street Journal, said in an interview with CRN that Compaq's effort to replicate Dell's cost structure is falling short of its goal and is alienating Compaq's channel. "They certainly need to drive their costs down as low as possible in a business where price is a critical variable," said Yoffie. "But trying to replicate Dell's model when you would kill third-party distribution and that represents almost all of your business is just never going to work. The question becomes: What can [Compaq] do that leverages off of their real strength, which is in their third-party distribution?" Compaq should focus on product innovation and engineering and then use its existing channel as a strategic advantage over Dell, said Yoffie. Since Compaq stepped up its direct distribution capabilities with the acquisition of Inacom's distribution business in 2000, its SG&A (sales, general and administrative) expenses as a percentage of sales have increased dramatically. According to a balance sheet analysis by CRN, the percentage declined steadily until the third quarter of 2000, when it bottomed out at 13.4 percent. Since then, SG&A costs have risen each quarter, hitting 17.4 percent of sales for the third quarter of 2001. But Jim Milton, Compaq's senior vice president and general manager for North America, said the vendor's hybrid model of direct and indirect sales is working. "Clearly there are different cost models for different fulfillment vehicles," he said. "That is one of the reasons why we are a hybrid distributor . . . unlike Dell, which is direct only. The hybrid distribution model over time will win." But some solution providers said Compaq's obsession with beating Dell on the PC side is spilling over into its enterprise divisions. Don Ritchie, president of Sequel Data Systems, a Compaq enterprise solution provider based in Austin, Texas, said the PC mentality is causing Compaq to "focus on tonnage regardless of how much money they make. I can't afford to make investments in high-end systems and infrastructure and end up with PC margins."