HP, Compaq, and the Computer

¶ … HP, Compaq, and the Computer Industry in 2001 and Beyond

The HP-Compaq case study addresses the main issue of the merger between Hewlett-Packard and Compaq Computer Corporation in 2001. The merger's primary objective is to make HP-Compaq the new leader not only in selling computer hardware, but also in providing consultation services among its corporate consumers. With HP leading in computer imaging and printing industry and Compaq, specializing on consultation services to small- to medium-sized companies. Thus, it becomes evident that HP, as the main proponent of the merger, has tapped Compaq in order to bring with it its advantage on specializing in the computer services and consultation industry.

Looking at the individual performance of each company prior to the merger, data from Garmer Dataquest shows that HP is the world leader in the production of printers and imaging services, capturing 40.4% of the market. Compaq, meanwhile, is at second place to Dell in the personal computer service market. Unfortunately, both HP and Compaq trail behind other computer companies when it comes to capturing the it services market, with a low 1.1% and 1% share respectively, trailing far behind IBM, which has already 5% share of the said market.

Thus, the HP-Compaq merger is both companies' business strategy to launch its plan to dominate the it service market. With the combination of HP's financial capabilities, wider scope of the consumer market in the computer industry, and partnerships with various computer companies specializing on it management, and Compaq's experience in it servicing and consulting will allow HP-Compaq to have a stronger business strategy in coming up with effective plans in order to launch the new company not only as a personal computer and imaging and printing services provider, but also as an information technology servicing and consulting company.

Analysis of the performance of both HP and Compaq shows that with the large number of players in the computer industry, specifically it servicing, the new merger faces the challenge of trying to break in an industry where image branding and establishment of a solid and loyal clientele are vital for the company's survival.

Apparently, HP's it services has a wider scope than that of Compaq's. Its partnership with independent software vendors allows it to operate on specific aspects of it servicing and consulting. The HP Netaction allows the company is created to 'create, integrate, and deploy new Internet services,' while OpenView provides "comprehensive management" of these Internet services. Other partnerships with software companies provide HP with personalized value-added services for broadband Internet services and solutions.

Analysis of Compaq's competitive advantage over HP and other computer companies show that even though it has had experience with it servicing, its focus on small- to medium-sized computer companies did not, apparently, induced growth within the company, even though it services comprise 30% of the company's total revenue. The stagnation of growth illustrates how it servicing in Compaq is still on its preliminary stage, primarily because of the small scope of its clientele, even subsisting to "older" computer products, such as Tandem and Alpha, for use in its it services and consultancies.

Looking at the competitors of HP-Compaq, three major companies emerged as the leaders of the it service market: Electronic Data Systems (EDS), IBM, and Unisys. EDS' advantage is that it has a partnership with Dell, offering services such as help-desk service, asset management, hardware maintenance, configuration management, and iMAC. IBM, apart from being one of the leading personal computer service provider, is also specializing in consulting, outsourcing, and technology integration. Lastly, Unisys, similar with IBM, centers on outsourcing services and network integration.

From the analysis above, it is evident that HP, on one hand, has a strong partnership and resources on it servicing, although exposure to the it service market is not developed, simply because the it services it provides are limited to HP's own clientele only. Compaq, on the other hand, has the experience and appropriate services that are essential for the establishment of it servicing and consulting. However, it does not have the latest technology concerning it service and Compaq's services are limited only to small- and medium-sized companies.