Concerns about ongoing product support are on the minds of many Hewlett-Packard Co. customers as they await the results of an upcoming vote on the pending merger between HP and Compaq Computer Corp.
With a vote on the HP/Compaq mega-merger expected to take place in the February-March timeframe, customers of both companies are sending signals that interruptions in product support is their primary concern.
At the same time, industry analysts have begun to caution both HP and Compaq customers that future product purchases from either company should be carefully considered, and a new survey of HP’s vast user base of e3000 server customers warns that almost 20 per cent will opt for servers from IBM Corp. or Sun Microsystems Inc. when HP ends support for the e3000 in 2006.
HP customer Dan Barth, CIO of the Oklahoma Publishing Co. in Oklahoma City, worries that HP will become distracted by the merger process if it goes forward. In Barth’s opinion, if any detail of the merger causes HP to suddenly re-think the profitability of a particular product line, HP may very well send that product line to pasture, a possibility that creates great uncertainty.
“We’ve seen this with other companies, like IBM. If they are not hitting a strong following in a product line, you will see them move away from that product line,” Barth explained. “The last thing you want to do is get on a technology that doesn’t grow, doesn’t evolve. The bottom line is [the merger] says to users ‘Do you go to an EMC or a Hitachi and forget the HP solution?’ You say to yourself, ‘I’m going somewhere safe.'”
A recent report from Gartner, an IT consultancy based in Stamford, Conn., warns both HP and Compaq customers to limit their purchases of HP and Compaq equipment to “tactical purchases and upgrades” of products that have long-term strategic commitments from either HP or Compaq. The report lists HP printers, Compaq Proliant servers, HP/UX servers, midrange Compaq StorageWorks storage, and high-end HP XP storage as products that have such a long-term commitment from the two companies.
Gartner analysts share user’s concerns that HP could be distracted by the merger and lose sight of many of its customers.
“Gartner remains concerned that senior management of both [HP and Compaq] will be seriously distracted by the need to persuade investors to vote for the deal, rather than engaging customers and improving strategy and execution,” the report said.
However, even increased communication between HP and its customers regarding on-going product support may not be enough to keep worried HP customers from jumping onboard a competitor’s platform. Less than 60 days ago, HP alerted its e3000 customers that the proprietary e3000 server platform would be phased out in 2003. Even with a migration strategy in place for e3000 customers to move to another HP platform, almost 20 per cent of nearly 1,000 e3000 customers said they were considering leaving HP for servers from IBM or Sun, according to a survey obtained by InfoWorld from Interex, an HP enterprise users group.
The Interex survey also showed that 29 per cent of HP’s e3000 customers were still undecided as to which server vendor they would go forward with, regardless of HP’s migration options, trade-in incentives, and other ease-of-transition offerings.
Sources strategically positioned within HP’s re-seller channel expressed shock at the responses to the e3000 user survey.
“Our only concern is that we keep these customers buying HP products,” said an HP channel partner who preferred not to be named.
The results of the Interex survey are similar to a survey of Compaq Alpha server customers taken last December by New York investment bank UBS Warburg.
When asked if a successful HP/Compaq merger would result in HP migrating Compaq’s Alpha server customers to an HP platform such as HP-UX, Warburg’s survey of Alpha customers showed that 90 per cent said they would be dissatisfied and would look at other vendors outside of HP.
Not all HP and Compaq customers are hitting the panic button though.
Richard Glasberg, the director of data communications for the Commonwealth of Massachusetts, said he had “no concerns” about the pending HP/Compaq merger, and that HP “telling me they are having problems would be the only reason I would begin to worry.”
However, Oklahoma Publishing’s Barth believes the history of mergers such as the pending HP/Compaq deal speaks for itself.
“We saw what happened to Compaq with the DEC acquisition. I’m not sure [Compaq] has completely digested that yet. What will be the distraction for HP? Will they be taking their eye off the server ball?” Barth said.
Pointing to HP’s purchase of Bluestone Software, analysts are also questioning whether HP is equipped to take on a merger the size of Compaq. Two sources close to HP, who requested anonymity, confirmed that Bob Bickel, one of the original Bluestone employees, has left HP.
“That’s a bit of shock, and it’s somewhat of a setback for HP,” one source said. “A lot of people from Bluestone have left HP.”
HP’s acquisition of Bluestone has not gone as smoothly as HP might have hoped, and the Bluestone products and manpower seem to have been lost somewhat within the mammoth HP, sources said. Furthermore, the company has not done well at competing with application server vendors IBM, BEA, and iPlanet.
“The big danger with HP is that they’d take the Bluestone products and it would get lost within the larger suite of HP products, and that seems to be happening,” the source said.
Hewlett-Packard Canada Co. in Mississauga, Ont., is at http://www.hp.ca
Compaq Canada in Richmond Hill, Ont., is at http://www.compaq.ca
