HP-Compaq will dominate local PC market

By Phil Boeyen, ShareChat Business News Editor

Wednesday 5th September 2001

The announcement of a merger between HP and Compaq will see the new company with a huge chunk of New Zealand's PC business.

IT research firm IDC has estimated that total revenues for the combined company here will be around $547 million, representing just under 12% of the total IT market value.

However in the PC market the company will easily be in the lead, raking in an estimated 36% of the money spent on PCs in New Zealand each year.

IDC analyst, Darian Bird, says that will overshadow its nearest rival, Dell, which has around 8% market share.

"Compaq owns the corporate PC space in New Zealand. HP is trying to get into it but it is really Compaq's space.

"The corporate end of the PC market is where most manufacturers want to be because companies generally upgrade more regularly than home users."

Mr Bird says the merger is the first serious market share aggregation New Zealand has had in the IT market, much larger than the Digital-Compaq partnership.

"Furthermore, the merged company's presence will be felt in a whole array of markets, including IT services, commercial systems and peripherals."

IDC says the merged company will have around 45% of the commercial systems market, well ahead of second-placed Sun Microsystems at 22% and IBM at 17%.

Another IDC analyst, Mark Cribbens, describes the merger as a classic exercise in obtaining market share via acquisition when share prices are low, margins are disappearing and competition is fierce.

However Mr Cribbens says the process of merging the operations of the two organisations will be extremely complex.

"The two companies will be at their most vulnerable while the merger is executed. Their main competitors will be fighting hell for leather to claim market share, hoping the merger will force HP and Compaq to take their eye off the ball."

Under the merger, Compaq shareholders will receive 0.6325 of a newly issued HP share for each Compaq share, valuing the deal at around US$25 billion.

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