Goldman Sachs questions HP and Compaq integration

12 September 2002 Systems giant Hewlett-Packard’s success in integrating the vast operations of Compaq Computer into its own structure have been brought into question by investment bank Goldman Sachs.

Goldman Sachs analyst Laura Conigliaro told the Financial Times that key aspects of HP’s business – most notably its server business – are treading water while it tackles integration problems. “HP has lots of customer-related issues they cannot fully address until they put together a lot of infrastructure,” she says. “They have a boat-load of issues… in the server side.”

Her comments are perhaps more surprising given that Goldman Sachs was one of the main advisors in HP’s takeover of Compaq, which was completed in May 2002.

A recent Goldman Sachs’ survey of 100 US-based multinationals found that HP has been losing market share to its enterprise systems and server rivals Dell Computer and IBM, and to EMC in storage. They findings are supported by figures from market research company Gartner Dataquest for the second quarter of calendar 2002.

Conigliaro’s analysis centres on HP’s customer migration and product consolidation plans – especially in its enterprise systems business, which includes servers, software and storage products.

HP’s latest financial results highlighted the uphill struggle the company is facing. For the third quarter to the end of July 2002, HP’s revenues dropped by 11% to $16.5 billion (€16.8bn), compared to a combined $18.6 billion (€19bn) for both companies in the same quarter a year ago. Earlier, HP CEO Carly Fiorina had suggested the revenue drop would be 5%.

Based on these figures, HP is now unlikely to meet its forecast for the six months to the end of October of revenues of between $35 billion (€35.7bn) and $36 billion (€36.7bn).

Goldman said HP’s comments in its third-quarter earnings reports also appeared to be contradictory. This is because HP claimed it was meeting its integration targets, despite acknowledging that weaker IT market and complex integration issues were making this task more difficult.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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