HP-Compaq merger: Is there a Plan B?

COMMENTARY-- Both sides in the Hewlett-Packard-Compaq merger battle have been claiming victory and attacking the other side for so long now that we're all good and sick of it. But whichever way the HP-Compaq merger comes out, Silicon Valley and the computer industry will be forever changed, and not necessarily for the better.

If the companies are merged, that is if HP acquires Compaq, we will have before us a giant new computer company approaching $100 billion in sales, chock full of success stories and the egos to go with them on both sides of the merger barrier. That company will be fraught with culture clashes, split by even more geographical disparity than either seed company currently has to deal with, and suffer a product set and strategy that is at best weakly defined. There is no possibility that a mere six months of planning by the HP and Compaq integration teams can have led to much more than a sketch of what strategies to follow and what types of products to make. I seem to also recall that we will also have thousands of unemployed engineers, marketers, and administrative staff to contend with in Silicon Valley.

But surely those rudimentary plans have the seeds of a new beginning, right? The question of the day is: Where will this behemoth be heading? HP CEO Carly Fiorina has argued long and loud that the giant new company will be able to compete in any arena of the computer field it chooses, and most especially it will be able to compete with IBM with its wide array of services, backed by its smaller array of products and an enormous willingness and talent to do whatever it takes to fulfill its customers computing needs. IBM has created a tough field to play in, and I wish any nascent contestant good luck and Godspeed.

If the companies are not merged we will then have two computer companies that will start out much as they are right now with a lot of success stories behind them, but topped by one big recent failure. They will be run by top management teams with very bruised egos who will have to dump their plans to cooperate and go back to competing, fair and square on the rough-and-tumble plains of the computer industry's field. Carly Fiorina has more than once said that there is no "Plan B" at HP, but to tell you the truth I don't believe that for a minute. I may not agree with her a lot, but she's too damned smart to fall into that trap.

Compaq CEO Mike Capellas has always said there is a Plan B at Compaq and you had better believe there is. There is simply too much to lose for the company if the merger doesn't go through and if every step is a misstep, or at least an unplanned foray onto muddy roads. You can bet that both companies will start out by continuing down the product paths they started out on today, Compaq with its wide line of computers, HP with its wide variety of everything digital, including computers. The big question will be, what pieces will be spun off or closed, what new product lines will be started, what new divisions formed? The sad part of all this is Fiorina's prediction that HP alone will have to lay of some 36,000 employees if the merger does not go through.

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Very soon now such prognostications will not matter very much because they'll be replaced by speculations about how the count is going, a count which may take as much as two or three weeks to tally. My vote doesn't matter because I'm not a stockholder, but there are some 900,000 shareholders whose vote does count, and will be counted during those weeks. But don't hold your breath. All accounts of voter action point to a close race, and those few weeks could be long extended by challenges from major shareholders, managements of either company and, of course, the Hewlett and the Packard families.

But we all better be ready to watch whichever company or companies emerge from this difficult campaign. The balance of power or at least the future of the computer may well rest on what they (it) do (does).

John Dickinson has worked in the computer industry for more than 30 years in positions ranging from systems analyst and software engineer to editor, writer, critic and industry analyst.