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No bangs, just whimpers

The outlook for the storage business in a merged HP-Compaq is anything but rosy, according to Ashok Kumar, who says the deal will snuff out the spark at what was one of Compaq's brightest lights.

As the completion of the merger between Hewlett-Packard and Compaq Computer draws near, one of the big questions surrounds the future of Compaq's highly successful storage business unit.

Of all the various businesses that Compaq swallowed when it acquired Digital Equipment several years ago, storage was the best of the bunch. At the time of that deal, the Digital storage group had just successfully launched its StorageWorks product line and was aggressively building a sales force and distribution channel. If you were a Digital storage employee back then, there was a lot to look forward to.

The acquisition by Compaq had raised the expected apprehensions, but it also raised great expectations among employees about what they would be able to do when merged with the most powerful PC manufacturer on the planet.

Digital had encountered problems marketing its excellent products outside of the VAX installed base, and many inside the company's storage team viewed the acquisition as a far better alternative to continuing to struggle as a stand-alone company. They saw this as a way to expand their horizons and sell their products to a wider world.

While all this was going on, HP was also trying to figure out its own storage business. The company struggled with manufacturing disk drives even as it developed a forward-thinking product called Auto-RAID. At the same time, HP pushed DAT tape drive technology as far as it could while trying to figure out how to make a business out of magneto optical drives and jukeboxes.

Over time, all these efforts failed for a number of reasons, and HP stopped being a developer of storage. The company has since been reduced to reselling other people's products into a shrinking installed base.

In contrast, the combined Digital-Compaq storage team emerged as the second-largest purveyor of storage products in the land in just five years. There have been long, hard struggles and internal jockeying, but the results have been good. During that same time, HP's storage business dwindled from once being meaningful to being mostly meaningless. Much of the division's talent was siphoned off into Agilent Technologies or left to work at other companies.

It's not a landscape with a lot of overlap; it's more of a landscape with competition and infighting built in from the start.
For the most part, the erosion in HP's storage business has had very little to do with Carly Fiorina's arrival. But HP's CEO has failed to do anything to turn things around either. I don't expect anything more from Nora Denzel, who was picked by Carly to run storage. If HP is going to stay in the storage business, it needs to find a way to own some of the new technology.

Back to the future?
HP bought Storage Apps last year, and there has been no news ever since. One gets the idea that things didn't go as planned. The merger of HP's and Compaq's storage business will almost assuredly not go as planned either.

The problem is that there are too many products that are architecturally opposed to each other. It's not a landscape with a lot of overlap; it's more of a landscape with competition and infighting built in from the start. This time around, there are no great expectations from Compaq's storage engineers looking forward to working for HP. The HP acquisition offers nothing to them except frustrations, product cancellations, marketing gaffes, and endless organizational meetings dominated by hollow pep talks that everyone would rather avoid. In the end, it will not be the best technology talent that stays, but the best politicians.

In the end, it will not be the best technology talent that stays, but the best politicians.

Put yourself in the shoes of a passionate storage engineer coming from Compaq. Beyond getting a paycheck and benefits, what other incentive would convince you to stay? Cost tightening will be a major objective in the new company, so whatever little perks you once may have enjoyed as a result of Compaq's success are probably going to be eliminated in the name of accounting fairness. In reality it doesn't work that way. Winners want spoils. The problem is that HP doesn't offer any--just a breakeven at best.

Five years and punt. It is over before it has started.