HP/Compaq deal likely to fail, says Gartner

Senior executives at Hewlett Packard (HP) and Compaq have started lobbying shareholders for support and have said they will decide on a post-merger strategy within the next 100 days.

But analysts, including Gartner, say the merger looks unlikely to clear regulatory hurdles and go ahead at all.

In the face of a second consecutive round of falling share prices for both firms, chief executives Carly Fiorina and Michael Capellas have begun lobbying institutional investors for support. HP's shares have fallen 22 per cent and Compaq's 14 per cent since the start of the week.

But despite both companies' best efforts, analyst Gartner believes it is unlikely that the merger will be completed and that, if it is, it will mean two years of confusion for the new firm's customers and will only benefit its competitors.

The analyst gave the merger only a 40 per cent chance of success.

Andrew Butler, research director at Gartner, said: "Neither HP nor Compaq has made a convincing case for this defensive acquisition. Enterprises can expect to be working in the dark for some months while waiting for a go-ahead, which is unlikely."

Just one of the challenges facing the new HP is the sheer array of multiple server operating systems it will have, namely Linux, Windows NT, OpenVMS, HP-UX and Compaq's own version of Unix, among others that it now supports.

US media suggest that the new company will now draw up fresh product road maps likely to converge towards supporting Linux, NT and Unix, but directing customers to those lines without alienating them will not be easy.

Butler, for one, thinks the deal will prove too complex. "The challenges mean that HP and Compaq will [likely] not complete the deal. If they do complete it, the companies, their customers and partners will experience at least two years of major uncertainties across all their business activities.

"This deal is unlikely to benefit any of them, including most customers."