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To: techreports who wrote (51209)	5/2/2002 11:14:01 PM
From: paul_philp	Respond to of 54805

TR, A few things. Yes, the analogy breaks down to some degree but I see the thinking that created the two mergers as very similar. For example, HP outsourced all the manufacturing of their PC's. Compaq has a very strong manufacturing capability. What is HPaq doing? Shutting down Compaq's manufacturing and moving everything to HP's outsourcing. How are you going to compete against Dell doing this? You dont but you do get your RONA down. While HPaq is busy putting the two companies together and making all the financial metrics work out, Dell will be innovating like crazy. I fully expect Dell to take the largest share of the IA64/Linux server market and I expect that market to be the only server market that has healthy growth for the next 5 years. I agree that Sun and IBM will have trouble ahead but when Carly talks about the merger, she talks like it gives HP scale to compete against IBM and Sun. She is dressing up for battle on land just as it moves to the air. She is fighting the wrong war. I think the true blue chip tech companies over the next 5 years will be Dell, Intel and Siebel (the jury is out on Cisco and Microsoft - they have awesome competitive advantages). No, I don't think Carly gets technology or technology markets. Paul

To: techreports who wrote (51209)	5/2/2002 11:33:36 PM
From: paul_philp	Read Replies (1) \| Respond to of 54805

news.com.com Here is an interesting account of Compaq's Cappelas talking the HPaq strategy. The bolds are my emphasis. I am impressed. He sees the world unfolding much like I do. If they can create a product gap between their Linux servers and Dell's Linux servers they might do ok. I am still sceptical though. Paul SAN FRANCISCO--The new Hewlett-Packard will have approximately six months to establish itself in the marketplace, incoming company President Michael Capellas told investors Thursday, but the company will hit the ground running. Capellas, speaking at Merrill Lynch's Hardware Heaven conference here, said the next big challenge lay in quickly bringing to fruition the company's plans to forge HP and Compaq Computer into a single entity. "You've got about six months or less...to have that very quickly execute in the marketplace," the current Compaq CEO said. HP, though, is certainly prepared, Capellas asserted. The company has established its product plans for the next three years, he said, and determined its corporate organization. Account managers for the largest 100 accounts have also been appointed. Details on these issues will be released May 7. Capellas said the team made up of representatives from both companies probably did a better job of developing a three-year plan than the individual companies had ever been able to do. The companies' respective product plans "will probably be clearer than when they were going in," Capellas said. You are what you eat The new HP in many ways will resemble the old Compaq. The company's strategy will largely revolve around aligning itself with technology giants such as Microsoft, Intel and large consulting firms to deliver products that will be cheaper than those from companies such as IBM and Sun Microsystems, which tout their own internal developments. To succeed in servers, "you become the No. 1 go-to-market partner for Intel; you become the No. 1 go-to-market partner for Oracle; and you become the No. 1 go-to-market partner for Microsoft," Capellas said. At the same time, HP will integrate enough of its own high-level features into its products to create a gap between it and Dell Computer, which is known for its mass-manufacturing efficiencies but performs less independent research. The new HP will "put some intellectual property into the Linux world" and stress its management software. In its heyday, Compaq strove to use standard components to make PCs and servers that were comparable in price to competing products but contained enough original engineering to set them apart. By contrast, HP spent considerable effort on building Unix servers and its own chips. The universe of potential competitors, Capellas said, has also become fairly small. There are only four: IBM, Sun, storage giant EMC, and Dell. "After all these years, we've come down to five companies," he said, adding that IBM was HP's biggest concern. Sun is particularly vulnerable, he asserted, because the shift from Unix, Sun's historical mainstay, is occurring faster than anticipated. "You are going to see Windows and Linux absolutely eviscerate the midrange proprietary Unix," he said. Many Compaq products will also survive the merger, Capellas indicated. "When we had a choice between two products, market share wins unless you give me some awfully compelling reason," he said. Compaq leads HP in many key markets, including Intel-based servers and PCs. The merger is also paying HP unexpected dividends. The new company is actually seeing greater cost savings than anticipated. The combined company will buy larger volumes of components from fewer suppliers than the separate companies. "We have found substantial savings in direct procurement above and beyond what we thought," Capellas said. "It is very clear that you have long-term success with fewer strategic partners. Fewer strategic partners, particularly with our volumes, is the way to go." Consequently, reducing the number of suppliers could set off competitive tremors in the component market. The two companies are also more disciplined now as a result of the merger planning. Like Michael Dell and other speakers at the conference, Capellas said that business has picked up recently, but it's still too early to declare a turnaround. "We are starting to get a little bit of pickup on the corporate side. You're seeing small projects open," Capellas said.

To: techreports who wrote (51209)	5/3/2002 12:38:33 PM
From: Thomas Mercer-Hursh	Read Replies (1) \| Respond to of 54805

Correct me if I'm wrong Can't resist an invitation like that! First, mainframes were become replaced by mini-computers (or was it the PC?) One would have a hard case trying to demonstrate the replacement of the mainframe ... have you noticed just how large that market still is? Not so awfully long ago I heard someone claim that something like 70% of the computer-based information in the Fortune 1000 was stored on mainframes. Minis and PC did a lot more to create new markets than they did to displace the mainframe. We keep hearing about how mainframes are going to go away, but it just doesn't seem to happen. One might think that server farms and such were another indicator that their time was finally over, but I'll bet that 20 years from now there will be more MIPS in mainframes than there is today.