CIOs give HP merger the thumbs down

According to a Merrill Lynch survey, users of Hewlett-Packard and Compaq products and services are against the proposed merger
Written by Margaret Kane, Contributor

Buyers of Hewlett-Packard's and Compaq products and services are against the proposed merger, according to a survey released by Merrill Lynch on Monday.

Merrill Lynch surveyed 100 US and European chief information officers about their planned spending on information technology. The CIOs said they plan, on average, to reduce spending on Compaq products by 10 percent, and those of HP by 4 percent, the study found. CIOs expressed concerns about customer service from a merged company, which could be "paralyzed" for several years.

Of the CIOs surveyed, 76 percent owned Compaq equipment and tended to be against the deal or undecided. Forty-six percent of Compaq customers said they were against the deal, compared with 25 percent for it and 29 percent who said they were neutral.

Of the 43 percent of the CIOs who said they owned HP computers, 42 percent were against the merger, compared with 26 percent indicating they were for it and 32 percent noting they were neutral. Shareholders are expected to vote on the proposed $22bn merger on 19 March. The vote is coming down to the wire; a major pension plan has announced it will vote against the deal, and proxy consulting firm Institutional Shareholder Services recommended to its clients last week that they vote in favor of the merger.

The Merrill Lynch survey countered a survey by Technology Business Research, which showed that customers supported the deal by a narrow margin. Both surveys showed a big block of undecided customers.

Though CIOs were only moderately confident that spending would improve in the second half of this year, a majority now expects to see real pickup next year. But the spending cutbacks at HP and Compaq could benefit IBM.

Thirty-eight percent of respondents said that IBM was gaining a share of their spending. And 46 percent said they would rather deal with IBM for systems, software and services than work with Sun Microsystems or HP, which work closely with systems integrators.

But that doesn't mean Sun will be left out in the cold. While only 25 percent of respondents said Sun was gaining their spending share, among those who were already Sun customers, 44 percent said they would be increasing spending with the company.

However, customers won't be spending in storage: Only 26 percent said they planned to buy storage from the company. Overall, storage spending is expected to increase 9 percent, with a slim majority of 54 percent going toward direct-attached storage.

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