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Commentary: Ten key consequences

Whether shareholders approve or reject HP's proposed acquisition of Compaq, the deal will profoundly affect the companies, their customers and the whole IT industry.

By Paul McGuckin, Gartner Analyst

Whether shareholders approve or reject Hewlett-Packard's proposed acquisition of Compaq Computer, the deal will profoundly affect HP and Compaq, their customers and the whole information-technology industry.

See news story:
HP declares victory in Compaq merger
Although HP's management has said it believes shareholders voted to approve the merger, it will likely take up to three weeks before the outcome is determined. Whichever way the vote goes, customers can expect the following:

• Tru64, OpenVMS, Netaction and many storage platforms are likely at risk. Whether merged or separate, HP and Compaq will likely use the decision to justify radical housecleaning of products.

• Customers have a unique opportunity to migrate away from risky platforms. For many customers, the risk will finally outweigh the technological inertia and loyalty to vendors and products that have kept them tied to marginal products.

• Enterprises will have a chance to lock in steep, multiyear discounts as HP and Compaq--whether merged or separate--try to win business at all costs to demonstrate their market power and stability.

• Field service and sales will likely undergo substantial turmoil as merger-driven reassignments or cost-cutting layoffs cause some of the best employees to leave and some geographic territories to have rougher transitions than others.

• Customer skepticism of vendor promises will likely increase as the vendors reveal product plans and modify pre-merger promises. Rejection of the merger would create a different kind of skepticism as the separate companies try to brighten the dark pictures they painted of their futures as separate entities and to convince customers that they have viable alternative strategies.

The implications more broadly throughout the computer industry include these five items:

• Dell Computer, IBM and Sun Microsystems will likely gain market share from HP and Compaq through at least the third quarter of this year and perhaps until the first quarter of 2003, largely because of the short-term instability associated with merging or implementing alternative plans.

• The industry as a whole will experience a new round of price cuts in higher-end servers and storage as vendors, led by HP and Compaq, try to hold onto market share.

• Linux and IBM AIX will increase their support among independent software vendors, likely at the expense of HP/UX and Compaq Tru64.

• Dell and Sun will likely partner with, or acquire, service firms to prepare for a greater focus on selling solutions.

• Transformation in the PC, server and output markets will accelerate as all vendors scrutinize their manufacturing processes, business models and research investments.

(For a related commentary on the HP-Compaq deal, see

Entire contents, Copyright © 2002 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.