HP-Compaq merger a success five years on: IDC

Stan Beer
Sunday, 05 November 2006 07:39

IT Industry - Strategy

In early September 2001, Hewlett-Packard and Compaq announced plans to merge. In the five years since the announcement, the two companies have successfully completed a massive integration effort and moved the combined company forward to new revenue and profit levels, according to a new report from research group IDC.

The new study looks at how HP and Compaq met the challenges of integration and the progress the company has made since the merger was formalized in May 2002. As with any merger, the two companies faced the significant hurdles of blending product lines and creating a new corporate culture. Ironically, it was that latter that helped the company to focus its product development efforts and avoid further investment in products without a clear roadmap forward, according to the report.

"What makes the merger interesting from a technology perspective is the extent to which HP has actually improved its position in a number of core markets that were rapidly commoditizing," noted Crawford Del Prete, senior vice president of Communications, Hardware, Services and Software Research at IDC. "The merger came at a time when both companies were becoming irrelevant in a number of key product categories. By completing the deal when it did, HP managed to position itself for the next wave of enterprise computing by leaping ahead of the trends that were working against the two companies as independent entities."

An important linchpin to the merger's success, says the report, was the commitment to infrastructure software, which helped move the company away from commodity hardware and into the management layer. OpenView gave HP a foundation from which to build in the software business, putting the company in a stronger position to compete with the largest system and services providers worldwide.

The IDC report found that equally important was the company's commitment to cultural change, where it was hoped that the infusion of Compaq's fast-paced corporate culture would help increase HP's "business velocity." The initial integration efforts greatly benefited from Compaq's "adopt-and-go" approach, although some product and management decisions came at a high cost. Organizational changes have remained a critical issue, however, as HP had reduced the size of its workforce, experienced the departure of two CEOs, and reorganized its management structure.

"The merger accomplished what HP and Compaq set out to do in the first place – it provided the critical mass and reach needed to ensure a long-term role in an industry that is undergoing a fundamental transition," said Jean S. Bozman, research vice president in IDC's Worldwide Server group and co-author of the report. "This deal enabled the merged company to grow revenue and profits in an increasingly competitive marketplace."