IDC picking merger yes vote

IDC New Zealand is picking that the Hewlett-Packard-Compaq merger, which will be voted on by shareholders of the two companies this week, will go ahead.

IDC New Zealand is picking that the Hewlett-Packard-Compaq merger, which will be voted on by shareholders of the two companies this week, will go ahead.

But the Auckland-based head of the market research firm, Dinesh Kumar, thinks the vote will be a close-run thing, and initially he doubted the merger would proceed.

“It looks like the tide has turned. I give the merger a 60% probability. But both will be prepared for whichever way the vote goes.”

Kumar believes the merger will be good for the IT industry as the combined company would have access to more research funds, plus greater “combined thought leadership” to help develop innovative new products. It would also allow development of a business model to help it compete with IBM, EDS and other services organisations.

But he says a question mark hangs over the two companies’ overlapping products, particularly in the desktop and PC server markets.

ITANZ executive director Jim O’Neill says the organisation, which represents IT vendors, would have no problems with a merger as the competitive local market would ensure the pair would not create a monopoly. The complementary nature of their product ranges would create some “synergies”, he says, but the firms would find “two plus two” would equal less than four, suggesting some sales could be lost as a result of the merger.

Both companies are working on contingency plans in case the merger doesn’t go ahead. Their New Zealand managers last week admitted as much, as opposition from HP family members continues to mount right until its shareholders vote on Wednesday, New Zealand time. Compaq shareholders vote the following day.

Compaq has “Plan A and Plan B”, says New Zealand head Russell Hewitt. “We have done a significant amount of work on how it might look in either model,” Hewitt told a press briefing last week.

HP New Zealand chief Barry Hastings says “the company is well-planned for whatever the outcome”. He would not say what has been done locally but preparation had been done “worldwide and regionally”.

Both bosses decline to comment on their own futures.

Hewitt says he would expect the merger process, with staffing and structures, to be settled in around three months. He doesn’t know how many redundancies there might be in New Zealand.

Voters in a snap email poll conducted by Computerworld are mostly against the merger. Less than a quarter of those who responded to a question asking whether the merger would be good or bad for customers thought it would be a positive development. They cite disruption as a new company structure is put in place, and reduced competition, as their chief objections.

“Cost efficiencies sought from mergers often don’t materialise and customers are the ones to lose out in the end,” said one respondent.

Also aligned against the deal are shareholders owning more than 20% of HP’s outstanding shares, including several relatives of HP’s co-founders, their trusts, institutional investor Brandes Investment Partners and a Californian state pension fund.

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Tags Compaq merger

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