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Winners and losers from the HP/Compaq merger

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Resellers hope Hewlett-Packard's positive attitude to the channel will pervade a future combined Compaq-HP while competitors hope to steal a march of the mega outfit while its energies are focused on completing a difficult merger.

That's the reaction from those industry players willing to comment on yesterday's announcement of the biggest ever IT merger, the $25 billion marriage of HP and Compaq.

Many big names in the industry (including Intel, Dell and IBM), are keeping their own counsel about the deal. Corporate reselling giant Computacenter admitted the deal had taken it by surprise and could see little point in commenting on it before it had spoken to both companies. It sells products from both firms.

Meanwhile competitors Sun Microsystems and Siemens Fujitsu have predicted a period of upheaval, which they are keen to exploit.

Jonathan Mills, software product marketing manager at Sun, said it had expected consolidation in the server market leaving five main (HP, IBM, Compaq, Dell and itself) players.

The HP/Compaq merger will "take out two competitors" for the nine to 12 months it takes for the deal to go through, said Mills, who added this is what happened in the case of Compaq's 1998 acquisition of DEC, which was previously the largest IT deal.

Mills said the deal would strengthen Sun and Dell in the short term though he conceded it bolstered industry support behind Itanium, which both Compaq and HP are firmly committed to.

Mel Taylor, UK Marketing Director at Fujitsu Siemens, while understandably downplaying the difficulty of large IT mergers, said that the re-worked HP was "undertaking this difficult task in a weak economic environment".

Both Sun and Siemens Fujitsu said large areas of product overlap and the fact that a combined entity would be committed to supporting a variety of operating systems and chips platforms. The counter argument to this (advanced at the time of the Alpha divestiture) is that Sun will find it hard to invest in the development of UltraSPARC in the long-term.

That aside, the main issue industry observers have picked up is that new HP would still fall far short of IBM in the lucrative services space, with Sun even further behind.

On the channel side of things, online reseller Dabs.com has welcomed the proposed merger of HP and Compaq because it finds HP an easier partner for mail order firms to work with, because Compaq has traditionally targeted its products solely at corporates.

David Atherton, MD of Dabs.com, said "This is not a merger, it is clearly a take over, and I hope that we will be able to buy Compaq from our friendly HP rep with proper rebates, and marketing schemes."

He added that major change in the market through the deal are unlikely this year. However he predicted a major shake up in the PC market after that with the dumping of HP Brio, Vectra and Pavilion models in favour of Compaq kit by dealers brought onto the Big Q roster.

Greater bundling of Compaq PCs and HP printers is likely to affect sales for printer rivals Lexmark, Canon and Epson, said Atherton, who added that a HP/Compaq merger was "very, very bad for IBM" in the PC market. ®

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