HP-CPQ: More people think its a stupid deal

Forbes.com weighs in to call it the Deal Of The Year–In 1998. Mike Langberg, writing in the SJ Mercury News (a site to which I prefer not to link since they charge for access after seven days), calls for government regulators to reject the deal on antitrust grounds; a combined company, assuming today’s market shares stand up (not likely in myopinion), would have a 67% share of the retail PC market.

Carly Fiorina, chairperson of HP and of the combined company, told reporters, “Hang with us, it’s going to be a great party.” Not if you’re one of the thousands of workers who’ll be losing a job as a result of this deal. The two have already announced over 17,000 layoffs this year but execs are projecting another $2.5 billion in savings from the deal, which means several thousand more employees will get the big L. C|Net News.com analyzes the challenges and sees a hard road ahead.

If this deal does not go through, I have to wonder if Fiorina and Compaq chair Michael Capellas will keep their jobs. Fiorina, especially, is under pressure to deliver after a previous acquisition of PricewaterhouseCoopers fell through last fall and she completely mishandled Wall Street over the first half of this year as HP forecasts fell and fell and fell.

I have to fess up to a small error in my previous entry where I said that Compaq had thrown away their entire investment in Digital. That isn’t completely true as they retain a very large and profitable services group; what they did throw away was Digital’s hardware business, which once was number two only to IBM. Of course, when they were number two, founder and then-chairman Ken Olsen famously said something to the effect of “Who needs a PC on their desk or in their home?”

I stand with my earlier sentiment: these are two drowning rats trying to use each other as life preservers. A Giga Research analyst had positive comments but that isn’t surprising given the amount of money the two companies pay Giga and the other maket research firms. More importantly, Wall Street is not reacting well, and both stocks are down in the initial trading with HP off 15%!