The HP-Compaq Merger: Partners Reflect 10 Years Later


When HP and Compaq announced a $25 billion merger agreement 10 years ago this week on Sept. 3, 2001, it shocked the industry and sent apprehension and anxiety rippling through the channel as naysayers predicted a very painful and even disastrous integration.

Big technology mergers weren't thought of very fondly by the channel, and many HP and Compaq partners were fearful the proposed merger would put both IT vendors in jeopardy and also cause a major disruption to VARs' businesses. Channel partners weren't the only ones concerned; the value of the deal fell $5 billion the day after the announcement as investors soured on the news.

But fast-forward a decade, and solution providers say the historic merger was a surprising success and ultimately helped their businesses. And the bold move ultimately produced what the two companies promised – a worldwide technology powerhouse with top revenue positions in servers, PC and printers (go here for the official HP-Compaq merger press release).

"You look back now, and Carly [Fiorina, former HP CEO] was right – there was a lot of synergy between the two companies," Tommy Wald, CEO of White Glove Technologies in Austin, Texas, said. "The merger worked out well in retrospect. I think they turned the combined company into a strong channel company, which is what we were all concerned about as partners."

Wald was one of many HP/Compaq partners who, at the time, were skeptical of the move. Wald's company Riata Technologies (which merged with White Glove Technologies in 2010) was a loyal Compaq partner, and Wald didn't want to see his top vendor become part of HP. He was greatly concerned about the potential disruption in the channel, too.

Some of those fears were realized; Wald said the taxing Compaq integration negatively impacted Riata's business as HP struggled to find the right channel strategy for the combined company. "HP started taking Dell's approach and began selling more direct, which gave us some heartburn," Wald said.

But after the integration was completed, Wald said HP refined its partner program and increased support for its enterprise product lines. "That's when we saw the real potential," Wald said. "Eventually HP pulled back from that direct sales push and really listened to partners. To their credit, the folks at HP continued to invest in the channel and in the relationships with partners."

HP said the merger paved the way for it to become the No. 1 IT company in the world.

"The combination of HP and Compaq built a business that achieved more together much faster than either company could on its own and built the foundation for the world’s largest technology company," HP said in a statement to CRN.

Fiorina and Michael Capellas, the head of Compaq at the time of the merger, could not be reached for comment.

Don Richie, CEO of Sequel Data Systems in Austin, Texas, was another partner who was highly skeptical of the move. He admits that when he heard the announcement that day, he was in "a state of panic" and feared the merger would be a disaster. A Compaq partner prior to the merger, Richie said the memories of another big IT merger were fresh in his mind. "We had just gone through the Digital Equipment merger, and that was very painful," he said.

But his fears began to erode slowly as HP began to integrate Compaq. In particular, Richie said he was impressed with how the two companies assimilated their respective partner programs into a combined effort that worked for both sets of partners. "In retrospect, yes, it was a good move for HP and for the partner community," Richie said. "I was wrong, and I'm glad they proved me wrong."

NEXT: Benefits of the HP-Compaq Merger