Dell Says Compaq-HP Deal Faces Challenges

Hewlett-Packard and Compaq Computer face a make-or-break shareholder vote on a proposed $21 billion merger on Tuesday. Analysts say it is still a toss-up whether the contentious deal will go through.

"It is one of the more interesting merger battles that has gone on in all of corporate history, and certainly one that we are paying a lot of attention to," Dell said at a function for the American business community in Singapore. "On the one hand, according to data presented, these companies need to do something to drive their costs down. Perhaps combining them is one way to do it. However, there is data around that shows merging large companies together...is not exactly promising. There are challenges to making that happen."

Dell Computer has been able to take advantage of last year's industry consolidation to build market share.

"Dell has benefited well from the consolidation,"' he said. "Dell's market share has been increasing."

On the outlook for Dell's U.S. business this year, Dell says he was hearing a fairly conservative tone from customers.

"U.S. business has shown a little bit of movement but it was difficult to see whether it is a real pick up in capital spending or just Dell gaining market share," he says.

Dell Computer has led a price war that has helped it win market share and capture the top spot from rival Compaq, now the second largest PC maker.

But PC demand has slacked off because the economic downturn has dampened buying by consumers and corporations, and the computer company is looking to find new areas for growth.

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