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HP, Compaq poised to dominate globally

Combined, the companies would create an international PC colossus--a leading hardware seller in Asia and in Europe, according to regional financial analysts.

A combined Hewlett-Packard and Compaq Computer would create an international PC colossus--a leading hardware seller in Asia and in Europe, according to regional financial analysts.

The deal--one of the largest in technology history--would merge two of the biggest names in computers, printers and computer servers, and would have total revenue only slightly less than that of IBM, the largest computer company.

"Based on historical figures (excluding Japan), the merged entity will be No.1 in Asia-Pacific in terms of PC shipments...knocking off China's Legend Computer," said Ian Bertram, the Asia-Pacific regional director for market researcher Gartner Dataquest.

For the second quarter, Compaq was the third-largest seller of personal computers in Asia in terms of units shipped, while HP moved to No. 6--bumped lower by Dell Computer. For the same quarter, Compaq took the lead in server sales in Asia, with IBM in second place and HP in third. Analysts said growth challenges will be acute.

"Basically, the Asia-Pacific market can't get any bigger. It will be interesting to see how they rationalize their existing product lines and if they can create critical mass," Bertram said.

"From a hardware perspective in the region, Compaq has a stronger strategy and execution as compared with HP," he added.

HP has manufacturing plants in Singapore, Japan and China, while Compaq has similar facilities in Australia, India and the Republic of China. HP employs 14,000 people in the Asia-Pacific, including Japan, and Compaq has 3,000 employees in the region excluding Japan and Greater China.

A new European giant, but for how long?
HP holds the No. 3 spot in Europe in terms of PC shipments. But with Monday's announcement, a combined HP-Compaq could control more than twice the market share of its nearest European rival, according to industry analysts.

But the company may not be able to maintain that position as rival Dell works to capitalize on the considerable time it will take to complete the Compaq buyout--and the confusion that will inevitably surround it.

A combined company would rise to dizzying heights based on numbers alone. The new HP would claim about 21 percent of the PC market in Europe, the Middle East and Africa, with quarterly shipments of about 1.8 million units, according to the latest figures from Gartner Dataquest.

The new HP would be No. 1 by far in the Middle East and Africa, with Dell as the nearest competitor, according to figures from the second quarter. Fujitsu-Siemens would take third place, followed by IBM.

Although the math is simple, the strategy is not, according to Ian Brown, research director for Gartner's hardware and operating systems group.

"You can't just take the No. 2 player and the No. 4 player and jam them together to create a winner," he said. "Dell is No. 1 because of its business model and its speed of manufacturing rather than just jamming something together to make something bigger than the rest."

Dell could even gain market share from the merger, Brown said. "Pulling two businesses together that have been slipping against Dell does not mean they will be bigger afterwards. Dell will make the most of this and will grow."

Globally, Dell passed Compaq as the largest PC maker in the first quarter of this year. And even combined, HP and Compaq will still not match Dell in PC sales. Both HP and Compaq have been losing worldwide PC market share and revenues in recent quarters.

In Europe, Compaq is still the largest PC seller, although Dell has been steadily gaining. Gartner reported that Compaq's market share for the second quarter of 2001 was 13.7 percent, down from 14.6 percent for the same quarter the year before.

HP has been growing in Europe, with 6.5 percent market share for the second quarter last year and 7.4 percent for the same quarter this year, an increase of 12.9 percent.

Staff writers Matthew Broersma and Matt Loney reported from London, and Fran Foo and Anand Menon contributed from Singapore.