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EDITORIAL: Channel in limbo

EDITORIAL: Channel in limbo

From our initial polling of channel players it appears the implications of HP's proposed takeover of Compaq will be far-reaching. Our coverage this issue is just the start of it - there is a lot more yet to be revealed and the channel awaits with bated breath to see how the cards fall.

Channel companies that have made large commitments to Compaq branding can only wait and see what the combined entity intends to do with its distribution partners. Obviously, strong and viable businesses will survive, but HP CEO Carly Fiorina has already stated that 15,000 jobs will be shed globally from the "merger", so the message is clear that there is a significant overlap in the combined organisation.

The rationalisation of that overlap will most probably affect the new entity's channels, which means Compaq-focused distribution and reselling partners will be hoping they haven't backed the wrong horse.

Until the new HP comes up with its strategies for this and a range of other issues, the future will remain uncertain. The big issue is what will happen to the channel and product conflict at the mainframe, server and desktop levels, but accreditation, warranty, online sales, marketing and branding concerns will all leave partners in limbo until they are addressed.

I would imagine there are some former Digital staff who lost out in the 1998 Compaq takeover, or who cringed and left over the culture clash between the two companies, who are chuckling at the announcement. Touted by the spin doctors as a merger, it is pretty clear that this is very much a takeover.

The boot is well and truly on the other foot for Compaq staff and it is they who will be playing second fiddle to their HP peers in the coming rationalisation of duplicate roles. There is a lot of talent in Compaq middle management but that could also be said of HP, so there will probably be some good sales and technical skills on the market in the near future. One way or another, there is sure to be some worried personnel at both companies.

The jury is still out on whether the combination of Compaq and HP will be enough to prop up the two companies, which have both experienced a marked change in fortunes in the last 18 months. Most agree it is a clear attempt to rival IBM in revenues, customers and breadth of offerings.

Both parties clearly have strengths that will benefit the larger combined entity. HP has an enormous range of products and a better-established technology brand by virtue of its long heritage. After all, it was Mr Hewlett and Mr Packard who kick-started the whole technology revolution way back in 1939 from a garage in the region of California that is now known as Silicon Valley.

Compaq introduces a significant bolstering to HP's services revenues and experience. The latter obviously felt it could not grow its services quickly enough organically as it was also involved in failed negotiations last year to buy consultancy firm PricewaterhouseCoopers.

Meanwhile, the success of Compaq's iPaq PDA range will benefit HP's aspirations in this growth market and augurs well for development of other next-generation appliances that look likely to supersede PCs. It has also been stated that Compaq has a wealth of marketing expertise that might liven up the conservative nature of HP's marketing messages and promotions.

But is it enough?

Only time will tell. I would be more than interested to hear how this merger affects your business, so feel free to email me if there is any confusion or pain concerning how the new entity restructures its channel.


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