HP/Compaq ready to roll

The PC is dead, long live the PC!

Back before Walter Hewlett nearly killed the HP/Compaq merger and seriously harmed its chances for success, I wrote a controversial column supporting the deal. At the time, I was a lone wolf in the wilderness, and even my most loyal readers let me have it. Most readers reminded me that the merger is a risky venture. Comments included: Mergers of this size rarely make better companies (see AOL/Time Warner); the merger would damage HP’s culture; the merger would lessen HP’s strength as an innovator by focusing too heavily on the mature PC market (see Compaq/DEC); the merger would create a lot of redundancies between product lines and alienate good customers of both companies; and the merger would leave thousands of good people out of work.

The trouble is, I agree with most of these assessments. Call me crazy, but I still think it is a good deal. It sure beats Hewlett’s vision of the solo HP: Exit the PC business and focus on printing technology. Under Hewlett’s vision, most of the above objections also hold true for a company with a tiny fraction of the revenue of the merged company. Printing is almost as mature as PC technology; only a fraction of HP’s current R&D is devoted to printing; you can’t call printer-cartridge technology seriously innovative; a lot of customers would be alienated if HP stopped offering end-to-end solutions; and thousands of good people would end up out of work.

The bitter proxy battle and contentious court case have led many analysts from reputable pubs like InfoWorld and eWeek to see the wisdom of the merger, not just because of Hewlett’s nasty tactics. A lot has happened to the industry since the merger was first announced. In September of Ô01, the PC industry was at the worst it has been since a decade before. Our November 2001 cover story, which I edited in September, tells the PC’s woe-be-gone tale at the time all too well. But since that time, PCs have staged a quiet, if not spectacular comeback, especially when you count laptops. Post-PC devices are growing in popularity, not as replacements to the PC, but as complementary application-specific computers (ASCs). Users need more ways to connect PDAs, cameras, iPods, storage devices, and other external ASCs to the mother ship PC–Steve Job’s Digital concept applied to the entire industry. Name your Post-PC device and it will need to connect to your PC. PCs have become hubs, replacing servers and their mainframe predecessors as the center of the digital universe.

That may sound a little strong when you consider the current situation in PCs. They’re overpowered for the bulk of their required tasks. They are designed for peak congestion, like that 16-lane freeway that is nearly empty for 18 hours of the day. We could do many of the things we use them for exclusively with post-PC devices. But, work is like urban traffic. There are times of the day when we need our Web browsers scrounging for info while we create graphic-intensive presentations on a tight deadline. Try doing this on an ultra-light laptop, let alone a PDA or Web appliance. The fact is most of us need the power of the current crop of desktop PCs at least some of the time. As employers demand more productivity from their people, these office rush hours will only increase in length and frequency.

For all other times, there is massively parallel (grid) computing. Connect all your office PCs on a cluster and bring the power of a supercomputer to your company. With the advent of Web services and the resurrection of peer-to-peer computing, more data-intensive e-business applications will require massively parallel computing to crunch the numbers. Grid computing may not justify the existence of muscle-bound PCs, it will provide an ulterior motive for IT departments to upgrade. (See my June Insights column for an elaboration this emerging trend.)

If the PC is indeed the center of the digital universe, HP needs to have PCs in its product portfolio. The question is not whether you should continue to produce PCs, but how can you continue to innovate on the PC concept, produce them cost effectively, and sell them quickly. HP admits that Compaq is among industry leaders in these PC business essentials, and that’s what makes Compaq attractive. Meanwhile, HP can stick to its strengths, which go beyond than printing. It’s on the leader board in servers, clusters, and service. If it can continue to grow in these core competencies while injecting life into Compaq’s PC business, HP will find itself in the race with IBM and Dell as a solid end-to-end IT vendor.

James Mathewson is editor of ComputerUser magazine and ComputerUser.com.

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