Channel Ready For Any HP-Compaq Scenario

Distributors, solution providers hope for channel-friendly results

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Distributors and solution providers said it's too early to tell what impact an Hewlett-Packard proxy vote victory would have on their businesses, but they're hopeful a combined company would remain channel friendly.

HP Chairman and CEO Carly Fiorina claimed victory this afternoon in the shareholders' vote to merger HP with Compaq Computer, a move that likely indicates approval of the merger, said Steve Raymund, chairman and CEO of distributor Tech Data.

"It doesn't seem likely Carly Fiorina would come out with those statements, unless she was pretty sure," Raymund said. "It's not like politics where politicians can make all kinds of claims. Executives have fiduciary responsibilities to shareholders to share accurate information in their public remarks. My guess is a quick announcement is predicated on her tabulations as the proxies were rolling in."

[The pro-merger vote margin was later said to be only one-half of 1 percent, in a statement attributed by Reuters to a source close to Walter Hewlett, who has vigorously opposed the deal.

Solution providers said it is too early to tell what impact an HP victory would have on their businesses.

"We're not too concerned about it. I remember when 3Com bought U.S. Robotics-- you'd think the world was going to end. We've been through a million mergers and we're still here. In fact, we [solution providers are the only constant," said Jon Eckhoff, president of Venture Computer Systems, Rochester, Minn.

But an HP victory would benefit the channel in two ways, Tech Data's Raymund said.

"The combined company should be able to compete more successfully in the PC market. Second, both companies have been completely absorbed by this merger, causing some expected slowdown in the decision-making process," Raymund said. "It's been an understandable distraction to executives. Now it's time to get back to work."

If HP and Compaq shareholders voted down the deal, the channel would likely feel a more dramatic effect, Raymund said.

"It would raise more questions than answers, particularly for HP, which had its CEO and board, except for Walter [Hewlett, behind the deal. If it was voted down, there would be a lot of instability on the board," Raymund said.

Tech Data has not had any discussions regarding integration plans for the vendors' channel programs or product lines, Raymund said.

"The decisions have probably been made, but both companies have been precluded from sharing that information, even with their closest partners," Raymund said. "As much as we wanted to know and they wanted to tell us, they were barred from telling us. I'd expect the spigot to open up now."

Some Compaq solution providers voiced concerns that they may have to switch their client base to a new company.

"The Compaq brand name has been what we use when we standardized our SMB clients' servers/pc/laptop environment," said Leonard DiCostanzo, president of Turnkey Computer Systems, Staten Island, N.Y. "I am sure there will be some new impact on running our business, from new procedures, channel programs, transition product guides, naming conventions. I was surprised by the whole merger talks, but life and big business moves on. If HP wins, at least the stockholders got to show the power of voting."

Distributors such as Tech Data and Ingram Micro have spent several months devising contingency plans for multiple scenarios, company executives said. Tech Data had five or six such plans, and Ingram Micro spent several months trying to determine the best way to handle its strategy.

The distributor put together a "comprehensive" communication and training plan that will go into effect once the company receives news of the final vote tally and confirmation from both companies, said Jerry Lumpkin, senior vice president of marketing at Ingram Micro.

"We are trying to give [Compaq and HP the best feedback as to what we think the best channel would look like," Lumpkin said. He declined to elaborate on the distributor's plans for the two vendors.

Ingram Micro has prepared to be a conduit of merger-related information to solution providers for 90 days to a year, Lumpkin said.

As a distributor, Ingram Micro is familiar with and has processes in place to handle mergers, spin-offs and product line changes on a regular basis. "From a marketing and communications perspective, we have to approach it as if it's a new product launch," said Lumpkin.

Ingram Micro addressed product lines, part numbers, terms and conditions, marketing programs and shipping changes in internal discussions and with customer groups, Lumpkin said.

"We are doing our best to protect both of these pieces of business," he said. Ingram Micro does not publicly disclose sales figures by vendor. "We do a lot of business with both vendors, and we have a pretty effective machine for doing it."

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