Compaq/HP merger EU approval a sideshow

The European Commission's approval of the HP/Compaq deal has never even been in doubt as it is insignificant, claim leading industry watchers.

It represents only a small step towards success, said Guy Hains, president and CEO at CSC, as it has yet to gain the approval of the US Federal Trade Commission.

Hains claimed the EC is the smallest barrier to overcome. "This is a little step," he said. "The difficulty will be in getting two different systems integrated and managing the business to get the necessary savings."

Carly Fiorina, CEO at HP, has claimed she can save $2bn, adding $5 to $9 value to each share.

But Hains warned HP could easily fall into the trap of talking up the potential savings to appease shareholders and the market but then alienate them by failing to deliver.

"The pressure executives come under to talk up the synergy savings is enormous," he said. "But then once the champagne is drunk and they've agreed who's in charge HP has to try and find these costs savings. We saw it with the Mercedes Chrysler merger when they couldn't deliver. It sends negative signals to the market."

However, Hains is not alone in his doubts.

Ian Welsey, analyst at Ovum, said the success of the deal is in the hands of the shareholders - not the regulators.

"Regulation will not have an affect on anything," he said. "HP has made all sorts of predictions to win the shareholders. But Fiorina's dream to compete with IBM is just a dream - it'll never happen. If the deal goes through it'll be because of the shareholders -I don't foresee any regulatory delay."

Walter Hewlett, heir to the original HP co-founder, has been the most vocal critic of the deal calling it a bet-the-company scam that wouldn't succeed.

In a statement, Carly Fiorina, CEO at HP said she was extremely pleased with the decision claiming it confirmed that the deal does not raise competition concerns in Europe.

However, this is not a view shared by all HP's competitors. Sources close to the EC said Fujitsu Siemens pushed hard right until the end of negotiations for the four month antitrust investigation to go ahead.

For related news, see
HP-Compaq mega-merger gets green light
http://www.silicon.com/a50936
It's make or break time for that damn merger
http://www.silicon.com/a50933
Compaq's Capellas collects the cream
http://www.silicon.com/a50918
"Say no to HP-Compaq": battle spills over onto the web
http://www.silicon.com/a50775
HP layoffs to go ahead: Merger or no merger
http://www.silicon.com/a50882

To buy related reports or event tickets, click:
Event: Interactive Games Summit 2002
http://www.silicon.com/goto-ecc-na1
Report: P2P Networking Overview Report
http://www.silicon.com/goto-ecc-na6
Report: Databases: An Evaluation and Comparison
http://www.silicon.com/goto-ecc-na2