02-20-2002, 05:48 PM
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Thinker
Join Date: Jul 2003
Posts: 468
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I'm an ex-HP guy.
HP makes most of their profits on printing and imaging supplies (ink and toner cartridges, mostly). They make most of their revenue on printers and imaging devices. The problem here is that the printer business (called the "ink holder business" inside HP since the ink is where the real money is), is going the way of the PC business-- into a commodity market. The competition has caught up with HP, or nearly so, and so it matters very little whether you buy an HP, a Xerox, an Epson, or a printer from any number of other printer companies.
As for the PCs, HP still is the #1 home PC maker in the U.S. and are in the top 5 in most home and business markets worldwide. But, as I said, it's a commodity market with very little profits to be made.
Walter Hewlett's argument against the Compaq merger is that HP+Compaq would dilute the profitable print and imaging business while exposing the company further to the not-so-profitable PC business. In my opinion, he's half right. Yes, there would be further exposure on the PC side, but that printer business that he's trying to protect is going to be in the same position as the PC business very shortly.
The big win in the HP/Compaq merger would be the combination of the service organizations. When Compaq purchased Digital (and to a lesser extent Tandem), they bought some great service groups that, when combined with HP's will rival IBM in size and ability. This is the same reason that HP had tried to buy PriceWaterhouseCoopers not too long ago.
The biggest issue in the merger, again in my opinion, is how to combine the server lines. HP already has three of them: Windows/Intel-based NetServers, HP-UX- (and now Linux, too) based 9000 servers, and the old MPE-based 3000 servers (which are being slowly phased out, but still have a huge user base). Add to that the Compaq Intel-based servers, the rest of the Digital servers, including Alpha and Vax, and the Tandem servers, and you have a mess of hardware platforms, CPU platforms, and OS platforms. How HP handles that mess will go a long way to indicate how they'll handle the rest of the merger.
The PC side is actually simpler. You have multiple divisions between HP and Compaq targeting essentially the same markets, so you pick the winners in each market and consolidate or eliminate the redundancies.
One final note-- HP does indeed still make calculators. In fact, I believe that they're made by the same division in Singapore that makes the Jornadas.
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