Word: compaq
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...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...
...appears, however, that they did not intend to work together for long beyond their goal of merging their firms. In HP's proxy fight to acquire Compaq, several institutional shareholders voted for the deal because of a recommendation by Institutional Shareholder Services, a proxy advisory firm that blessed the merger; it gave its approval partly on the assumption that "key managers from each company will assume important posts after the merger." Explains Patrick McGurn, general counsel for ISS: "We were left with the impression that we were getting two leaders for the price of one. There was never a time...
Capellas, who says he went to WorldCom partly because "there's appeal to being a CEO," was not offered incentives to stick around at HP. In December 2001, Compaq's board amended his severance package so that if he resigned from the merged firm within a year, he would receive a lump-sum payment--worth a previously agreed-to $14 million--within 10 days of his departure. When he left, he also received $1.6 million as part of a loan-forgiveness plan. After the merger, his employment contract was not renegotiated to entice him to stay...