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Compaq spreads kind words for merger

With much uncertainty surrounding its proposed deal to be acquired by Hewlett-Packard, the company is offering a new way for employees to sell customers on the value of the deal.

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      Analyst: Compaq, HP own up to bad news
    Carl Howe, principal analyst, Forrester Research
    With much uncertainty surrounding its proposed deal to be acquired by Hewlett-Packard, Compaq Computer is offering a new way for employees to sell customers on the value of the deal.

    Compaq on Tuesday posted to its internal Web site a series of quotes from industry analysts and executives lavishing praise on the potential of the merged company. The computer giant encouraged employees to share the quotes with concerned customers in their letters and presentations.

    "The proposed union should be a positive experience for customers because the new corporate entity should be better positioned to extend its reach into both the enterprise and small-business customer spaces," reads a quote attributed to Boston-based technology consultant Patricia Seybold. "Both companies value the channel. They need it and see it as a healthy way to serve customers."

    Retaining current customers is critical for Compaq. Compaq said Monday that uncertainty about the merger caused customers to delay purchases and is partly to blame for the company missing its third-quarter sales and earnings projections.

    Compaq's effort to reassure its business partners comes as the value of the deal continues to plummet. Although worth $25 billion when the stock deal was announced, HP would only be paying about $16.4 billion in stock based on Compaq's current share price.

    In addition to quotes from other analysts including IDC and Forrester, Compaq's internal Web site posting points to comments from its customers and suppliers.

    HP stock watch
    HP and Compaq announced a stock-swap deal worth $25 billion. Because of fluctuations in the stock, the value of the deal may change. This is the approximate value (20-minute delay):
     
    $24,149,073,900
    While the analysts quoted all praise the deal, other analysts and professional investors have offered a harsher take.

    "There are so many overlapping units, and there is no complementary benefit," U.S. Bancorp Piper Jaffray analyst Ashok Kumar said when the deal was announced.

    The comments from Seybold and others were made public as part of a regulatory filing Compaq made Tuesday with the Securities and Exchange Commission.

    Among the customer comments was one from coffee giant Starbucks, a Compaq Alliance Partner.

    "The synergy between Compaq's and HP's collective assets and competencies truly holds exciting potential for our alliance going forward," said Darren Huston, a senior vice president at Starbucks. "Like you, we truly believe this will strengthen the already strong bonds being formed between our two companies."

    Even Intel Chief Executive Craig Barrett heralds the deal.

    "Combining their hardware skills and service efforts gets them much closer to critical mass across the board," Barrett said. "It makes a whole lot of sense to me."