PROCESSORS

By Steve Fisher, Editor In Chief -- First off, I’ll begin this story with a promise not to do this type of story very often. To be perfectly frank, at this moment I’m not really sure where I’ll be going with this. It may get a little strange. If it does, apologies. You start a new business, you lose sleep, things get a little weird. So it goes. You are all of course aware of this week’s news that Hewlett-Packard is acquiring/merging with Compaq. About this course of action the two companies have chosen I have heard both positive and negative things. The positives go something like this: -- The combined company will have #1 worldwide revenue positions in servers, access devices (PCs and hand-helds) and imaging and printing, as well as leading revenue positions in IT services, storage and management software. -- The acquisition of Compaq will bolster HP’s efforts in the high performance computing sector. -- Cost structure improvements as a result of the merger could potentially improve shareholder value. -- HP has a fairly strong business selling UNIX-based machines and Compaq does fairly well with the Microsoft Windows NT variety. Could work out to be a nice mesh. There may be a number of others, but they aren’t leaping out at me at the moment. Please feel free to comment on this story and mention any positives I have neglected. Now, the negatives are far more plentiful. Here are a few very simple ones I thought of: -- A lot of people are going to lose their jobs. -- Confidence in the merger cannot be considered “high” when you read that analysts have referred to it as “Fiorina’s Folly.” -- The stocks of both companies are down and the deal that started at $25 Billion has shrunk to $19 Billion in a number of days. -- HewPaq: It just sounds funny. -- Most of HP’s revenues come from PCs and printers. Compaq sees a lot of its revenue from PCs as well. The recent market for PC’s hasn’t been too hot has it? Also, it makes one wonder how much the new company will pay attention to/innovate in, the high performance computing space. Once again, I’m sure that there are other negatives that are simply escaping me at the moment. I urge you to use the “Send Your Comment” button at the bottom of this article to note others. Let’s open up a discussion about this. I will go on record right now as saying that I don’t think the HP/Compaq merger makes a lot of sense. That is of course “common” sense, and in no way reflects a great deal of “business” sense or technical expertise in such matters. If you were to say, “This guy doesn’t know what he’s talking about and should just shut his pie hole!” you would have a semi-valid point. However, I’m the editor and once in a great while I will write things like this. Now, just for fun, this is what I say we do. This is pure fantasy and folly of course, but I will propose another merger that I think would be very interesting, and if you have a spare minute, you comment on it. Sound good? IBM ACQUIRES SGI What if IBM were to acquire SGI? IBM is currently, and has been doing quite well despite the recent economic downturn, which I have often heard referred to of late as “The general macroeconomic environment.” IBM’s stock is at the time of this article at $98/share and change. SGI’s stock is currently at an unfortunate (sorry, I dig their work) $0.43/share. The company seems to me to be ripe for a buyout. I really see only positives in this merger (I’m calling it a merger despite the two firms' radically different financial situations because in my mind I envision that SGI becomes a wholly owned subsidiary of IBM rather than just being absorbed) and here is what they are: -- SGI is huge in Hollywood and to the best of my knowledge, IBM, and most other HPC-related firms, are not. IBM enters the “entertainment computing” sector with a bang due to its support of and respect for, SGI. -- IBM gets this potentially very high profile boost at what I would imagine would be a pretty good price. -- IBM gets some very well respected hardware and software assets. Again, at a very fair price. -- I imagine that due to the strength of such a partner, SGI’s (should it be allowed to keep some amount of sovereignty) money issues would be gone forever. Well, that’s about it. Please let me, and other readers know what you think about both the HP/Compaq merger and the fictitious IBM/SGI merger. And oh yeah, here’s one more to think about…Sun merges with Cray.