HP/Compaq: Testing times for firms warns ITANZ

The Compaq-Hewlett Packard merger faces its most "testing times" between yesterday's announcement and its planned close early next year, warns ITANZ chief executive Jim O'Neill.

The Compaq-Hewlett Packard merger faces its most “testing times” between yesterday’s announcement and its planned close early next year, warns ITANZ chief executive Jim O’Neill.

O’Neill, a veteran of several mergers in his IT management career, says such mergers never achieve exactly what is hoped for and he doubts the combined body will be as big as the two constituent companies are today.

Research company International Data (IDC) says based on current values, the combined entity should create a company of $547 million of revenues in New Zealand, representing 12% of the total New Zealand IT market.

“Never have you ended up with the combined revenues because inevitably there will be increased activities by competitors,” says O’Neill.

“There will also be increased uncertainty and concerns from Hewlett-Packard customers (who may go elsewhere),” he says.

O’Neill also warns of “anxiety” within the top people of both firms which could lead to senior staff quitting either of the organisations. However, he refuses to speculate on the futures of their respective New Zealand chiefs Russell Hewitt (Compaq) and Barry Hastings (HP).

“There will be ones saying ‘I can make their own decisions, I am not happy and I am going’. This is going to be a pretty testing time for the management of HP and Compaq both in New Zealand and elsewhere. They will be working hard to bed it down,” he says.

O'Neill says the implications of the merger here will differ from overseas as neither company has manufacturing operations in New Zealand. But there will be job-losses here as functions are duplicated, “especially corporate functions.”

He is unsure how many staff may go, adding: “I doubt even the companies themselves know.”

O'Neill says the IT industry has seen mergers like this before, with Compaq taking over Digital in 1998. Compaq’s Hewitt also has merger experience from his days at Computerland.

O'Neill says he was in the management team who formed Unisys out of Burroughs and Sperry in the late 1980s.

“That caused significant management problems in New Zealand and took a long time to work out.”

O'Neill's other mergers involved Bull Information Systems and Wang, plus Bull and Honeywell.

“There will be rationalisation, but the industry will have new players. Compaq is only 20 years old, Microsoft the same,” he says.

O’Neill likens IT to the car industry, which once had hundreds of firms worldwide, now reduced to about 20.

“There will be more mergers,” he says.

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