Partnership may alienate customers

Moves like the recent report of a possible marriage of HP and Compaq may make customers run scared, according to the president of Sun Microsystems.

“Hewlett-Compaq-ard, or whatever it’s called, well, it’s certainly interesting,” said Edward Zander, president and chief operating officer of Sun Microsystems Inc. “If you list all the high-tech mergers, history can teach you a lot. Many have fizzled out, but maybe they know something we don’t.”

Zander said Sun’s long-term strategy won’t change because of the companies’ recent announcement, but later stated that Sun’s visions are consistent, but its tactics remain flexible.

“Hopefully these guys (HP and Compaq) are thinking about knocking on doors of customers,” he said, explaining that because HP and Compaq have made several large moves over the last few years, their customers are feeling uneasy.

“They have two of everything. It’s like Noah’s Ark.”

Zander was in downtown Toronto earlier this month for a corporate meeting, and fielded questions from the press on subjects ranging from the future of the Internet to Sun’s ability to avoid layoffs and mergers to recent claims that the tech world has far more infrastructure than needed.

Zander credits Sun’s discretionary cost measures, consistency and good employee management as reasons for not being forced to merge or have massive layoffs.

“Our concern is that we like our strategy, we like our vision and we like our place in the marketplace and we didn’t want to mess that up,” he said.

Zander said Sun has had the same, consistent components since they went into business, and that is why they are stable. In fact, Zander said he was speaking with a “large manufacturing company” Wednesday afternoon that was initially interested in moving away from HP, and even more so now as a result of the announcement.

Alan Freedman, research manager, servers and storage at Toronto-based market research firm IDC Canada, said that is exactly the kind of statement that may be able to garner Sun some extra business from this merger.

“There’s a lot of deals that have just been signed (with HP or Compaq) or are just on the table right now and those people are worried,” he said.

“The merger doesn’t really affect Sun strategically. But tactically, I think they are going to be busy calling up potential clients who have recently gone with an HP or Compaq bid over a Sun bid. Now Sun can go back and reiterate what it can offer and maybe try and steal some business while there is a little bit of confusion in the market.

“There is potential for them to try and gain some market share,” he said.

Freedman said this merger is also beneficial to Sun’s message – that simplicity, as opposed to overly complex businesses, is the way to go. Zander didn’t waste any time at the meeting communicating that message.

“The thing with Hewlett Compaq-ard is that I couldn’t figure out what they were telling me,” Zander said. “One on hand, they say they will be a service company. Well, service what? They have to have Judge Judy vote every day on ‘Is it going to be my Intel architecture or your Intel architecture?'”

After answering business questions, Zander made some predictions about the future of the industry. He said the Internet would soon be as pervasive as electricity in households, but he had a warning for those looking to make money off the Internet in what he calls “the real lesson of the last two years.”

“The Internet is a technology, not a business,” he said. “People got caught up when they saw . . . and thought it was going to put Wal-Mart out of business. You have to treat it as a technology in that you have to figure out how you are going to use the Internet to make your business processes more efficient?”

The COO also disputed recent claims that there is too much technology-based infrastructure existing today.

“I believe all of this capacity over the next couple of decades is going to be gobbled up and used,” he said. “I am still very bullish on it.”

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