Feeds

SirCam merger gets personal: Valley aristos send Compaq paq-ing

Eat my grits

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

Analysis We're not sure if Carly Fiorina is familiar with the great Ealing comedy Kind Hearts and Coronets, but right now there probably isn't a better motivational video for those members of HP's corporate team who are determined to see the unpopular merger with Compaq through to completion.

In the movie, a disinherited bastard of the D'Ascoyne family plots to assassinate the eight D'Ascoyne heirs (all played by Alec Guinness) who stand between him and the title.

Carly now has a similar challenge: after William Hewlett's son, Walter, his two sisters, and the family trust all vowed to fight the proposed acquisition of Compaq. And she's going to need some ammunition.

The son of Hewlett Packard co-founder William Hewlett has changed his mind about the merger and is now recommending that HP shareholders vote against the proposal. As a board member, he originally acquiesced to the deal, and the declaration appeared to take HP by surprise: it took several hours for HP PR to publish a statement saying it wasn't surprised.

Hewlett Jr's opposition is detailed, and almost personal, and it threatens to derail the two-month-old Carly and Curly show.

No confidence

Young Hewlett's rationale is unexpectedly detailed, and will cause some consternation in Cupertino. Hewlett believes the integration risks outweigh the dubious gains from the deal. However, it's the specifics that hurt...

Hewlett Jr cites the dilution of HP's valuable printer franchise, and the increased role played by a commoditised and unprofitable PC business in the new mix of a merged Hewlett Paqard.

But most damningly, and in a statement that comes close to being a vote of no confidence in HP's current CEO, Hewlett describes Compaq as the wrong kind of services company for HP.

"Compaq's services business, which is more focused on support than outsourcing and consulting, is not the type of services business that Hewlett-Packard should be seeking to grow," he notes.

Fiorina has been seeking to buy a heavyweight services business since she took the reins at HP, and was unsuccessful in a bid for PWC's IT consultancy arm.

Young Hewlett's opinion adds weight to the argument that a services business at any cost is not an attractive proposition.

Fiorina was almost certainly right in expressing the need for a stronger services businesses. After the roller coaster dot.com implosion three enterprise IT vendors are left to face the recession: IBM has its in-house Global Services division, and Sun has a channel. HP has a bit of both: it has a financing division, and it has a partner network. But what it doesn't have - and what Carly identified early on in her reign - was a religious sect of expensively-suited consultants who could descend on an IT operation and sign it up to lucrative long-term facilities deals.

Young Hewlett is almost certainly correct. Compaq's services are geared to tend to its ageing midrange stalwarts DEC and Tandem, and specific vertical niches, and in many cases these are mirrored by HP.

With Mike Capellas, Compaq's firesale CEO, cutting much of the R&D that makes future services businesses possible, such as the Alpha chip, Compaq actually brings less to a possible merger than it could have in happier times. So the merged HewPaq has little synergy to kindle except job cuts. Which makes it a great deal for Compaq, but an unfathomably bad one for HP.

Both Fiorina and Don Capellas have staked their personal reputations on the HP/Compaq merger succeeding. They're now meeting not only resistance from the biggest institutional shareholders, but the nearest thing Silicon Valley has to an aristocracy, too.

We're not sure if Walter Packard read our infamous Merger Memos before he changed his mind, but yesterday's satire has a habit of becoming tomorrow's Mission Statement.

With both Fiorina and Capellas committing so much personal capital on the success of the caper, it's hard to see either surviving a no vote. Which now looks more likely than ever. ®

Related Stories

Hewlett family hate Compaq merger (true)
Revealed! The secret memos that ignited the HP/Compaq merger
HP/Compaq merger: You the Jury
HPaQ must die - major investor
Compaq name to go, will trade as HP
HP-Compaq merger - readers speak their minds
Princess Fiorina kisses the Ugly Frog
Princess Fiorina addresses subjects

Internet Security Threat Report 2014

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
Microsoft EU warns: If you have ties to the US, Feds can get your data
European corps can't afford to get complacent while American Big Biz battles Uncle Sam
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.