HP-Compaq: IT directors just don't care

The leaders of the UK's largest IT directors' organisations have dismissed the Institutional Shareholders Services (ISS) green light to the HP/Compaq merger as "irrelevant".

David Rippon, managing director of Elite, said it doesn't matter whether the ISS has recommended shareholders vote in favour of the merger or not as most CIOs see the entire debate as a "big yawn".

Neither company has an influence on corporate IT directors' strategic decisions, said Rippon.

He told silicon.com: "In a time of falling revenues, HP is just trying to find another way to keep products going through the channels. Where is the added value coming from? HP produce printers and Compaq do PCs, neither are service companies so this can only be a deal for cost reduction."

Rippon dismissed PCs as a disposable commodity.

David Taylor, managing director of Certus, agreed and said desktop and printing problems don't even feature on IT directors' strategic radar.

He said: "The problem is that most suppliers have low credibility with IT directors. Microsoft has been holding too many people to ransom for too long and this particular deal is just a case of two giants getting bigger.

"They'll be embroiled in internal politics for the next two years so we won't hear much in the way of product development."

HP CEO Carly Fiorina has pitched the $28bn merger as HP's chance to compete with IBM in the enterprise market and has made no secret of her desire to it wrapped up by 1 April. In a recent security analyst meeting she said she wanted to "hit the ground running".

"On day one will be executing not deciding. We've invested 500,000 man-hours in detailed integration planning and have an 600-strong integration team," she told security analysts.

The security analysts' meeting on 27 February was seen by many industry analysts as a milestone for HP's attempts to win support.

Mitul Mehta, managing director at research house TekPlus, said: "Firstly the EU approved it, and then the analyst meeting signalled an important change in the wind. HP has been holding separate fund manager meetings to get all the issues into the open and now this. It's what the market has been waiting for."

But he claimed the battle was not yet won.

It is essential that large institutional shareholders come out publicly in favour of the deal. To date, institutional investors holding only 2.34 per cent of the vote have publicly supported it.

However, Elite's Rippon remained unconvinced. He said: "When Compaq bought Digital, Dell gained market share at the expense of Compaq and the same thing will happen here. I should imagine Dell is licking its lips and welcoming the deal as it means HP will take its eye of the ball."