NAMP Rules! HWP/CPQ Tools?

For a change, we had two big
stories this morning, and what a shocker, neither was bad news for Wall
Street! First, purchasing managers said U.S.
manufacturing picked up a bit of steam in August. Traders IMMEDIATELY turned
their hands from facing away from themselves to back towards themselves
(signaling a switch from selling, hands out, to buying, hands in). Why such a
quick and decided response? Thursday’s oversold condition was certainly a
contributing factor, but the NAPM was viewed
by many on the trading floor as perhaps a harbinger of a revival in the world’s
largest economy. That’s the bottom line.

The other story was the Hewlett Packard
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and Compaq
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lovefest, which, if
we judge by the market’s reaction, was not as significant. Why was the
proposed $25 billion merger taken so complacently? Let’s look at the pros vs. the cons, or vice versa:

Some of the negatives Hewlett Packard and Compaq have to overcome:

  • Relentless
    price pressure

  • Slowing
    PC sales

  • Sour

  • Difficulty
    of merging two overlapping corporate bureaucracies

  • The
    combined company will employ more than 145,000 workers for now. I would
    expect the overlapping business to necessitate job cuts of 10% to 20%.


  • The
    combined entity will have revenues of $87.4
    billion — that is second only to IBM’s.

  • Should
    help the two companies shed costs to better compete with Dell Computer

  • The
    merger will be able to offer computers, servers, printers and consulting
    services. (Compaq currently gets 23% of its revenue from consulting

Other Factors:

Compaq did the last big tech merger when it bought Digital Equipment in ‘98
for $9.6 billion. The
merger will
the pressure on
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to merge, and I’ll have more about that situation in tomorrow’s column.