Word: compaq
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Dates: during 2000-2009
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Fiorina's supporters think HP in the middle will be a hit show. The rationale for acquiring Compaq has not changed, they argue. By buying Compaq's vast product portfolio, R.-and-D. muscle, direct-sales channel and 34,000 tech-service pros, HP could thwart IBM and Dell. "Analysts are waiting for us to put points on the scoreboard," says Michael Winkler, Fiorina's executive vice president for operations. (Fiorina declined to be interviewed...
...plants, cut 12,500 jobs and "rationalized" its product offerings, reducing them to 65,000 from 85,000. Result: $650 million in savings since the merger, which helped HP offset losses in its divisions that make PCs and enterprise-computing gear. "I'm keeping my shares," says Ben Rosen, Compaq's former chairman and a large shareholder. "HP is going to get so lean that earnings surprises will be on the upside...
...Compaq client Charlie Orndorff is a believer. As chief information officer for Crossmark, a sales-and marketing-support firm based in Dallas, Orndorff spends the bulk of his $15 million IT budget on tech support for Compaq handheld devices, PCs, servers and storage networks. "Dell approached me," he says, "but all my engineers are HP certified, and adding brands with other certification requirements for a slightly lower price on the hardware wasn't compelling enough...
Even if Fiorina can thwart Dell's attack in hardware and services, that still leaves IBM gunning for her other flank in higher-end corporate computer systems and services. IBM retained its market share in servers through this year's second quarter, while Compaq's share has eroded slightly, enabling IBM to pull to a tie in terms of global revenues, according to IDC. IBM CEO Sam Palmisano recently said the company would invest $10 billion to enable clients to purchase computing power "on demand," signaling to HP and other rivals that Big Blue is planning a war of attrition...
Having PWC helped IBM win exclusive negotiating rights for a $5 billion deal with J.P. Morgan Chase this month. HP did not bid for that job, and in February neither HP nor Compaq was able to beat IBM for a $4 billion contract with American Express. Says Doug Elix, chief of IBM Global Services: "HP reminds us of where we were 10 years ago when we were building our services and got into outsourcing. It takes a long time to build services that have the breadth ours do." As evidence that it can tackle IBM in large outsourcing jobs...