HP has distinguished itself with several innovative products over the
years:  high quality test equipment, state-of-the-art pocket
calculators (with the intuitive RPN language), and unix workstations.
In recent years they have branched into PCs and printers.  Here they
have lost their edge, since their PCs are just clones of the IBM PC,
and the printer division, although profitable, faces heavy competition
from high quality printers made by Epson.  HP's printers using Poscript,
offer only a clone version of that language, which has sometimes
created problems for people trying to print postscript files.

Compaq, though distinguished by being the first company to clone the
IBM PC, has not historically been very innovative.  After all, in their
PC clone days they did not have an architecture, did not have an
operating system, and did not write software applications.  In an
effort to boost their status a few years ago they acquired Digital
Equipment Corp. Thusly they could boast a unique architecture
(VAX and Alpha), an operating system (OpenVMS, Ultrix, and True64 Unix),
software applications (numerous compilers and applications written by
Digital), as well as IT services.  Yet their market share has plummeted
and they are now contemplating phasing out the Alpha chip.

What is the best approach for these two companies to take?  Should
they mend their ways, or should they combine their ways?  The question
is somewhat like the question of whether two individuals, each with
personal problems should get married.  Actually, in this case it is
an arranged marriage not one based on love.  The comparison is not
like a doctor taking on a sick patient, since in that case one of the
two is a proven healer.  A merger of these two companies in my opinion
would create more problems than it would solve.  Even by consolidating
the PC branches, the combined company would still have to deal with
withering competition from aggressive shipper and packager companies
such as Dell and offshore clone marketeers.  Furthermore, the time
and expense of merging PC operations could prove fatal in the long run.
One also has to ask whether the Compaq staff has an interest in printers,
and whether the HP staff has an interest in unique architectures,
operating systems, and compilers.  The latest polls show most employees
of both companies not in favor of the merger.

Warnings about the HP board resigning if the merger does not go
through are quite interesting since it could easily be argued that
what HP has needed all along is a new  board (excepting Walter Hewlett).
If the merger does indeed fall through each company should probably
seek outside advice about its future directions and seek a change in
leadership.

Donald Gudehus

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