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Compaq brands likely to vanish from the market

Compaq Computer Corp, which is being acquired by rival Hewlett-Packard Co for US$19.4 billion, has built its business on products such as Presario personal computers, Ipaq Pocket PC handheld devices and Himalaya servers.

If the acquisition is completed, most of Compaq's product brands names may disappear, analysts said.

"Are there any brands that you'd get run over by a truck for? Not really," said Carl Howe, principal analyst at Forrester Research Inc.

"I don't think that they'll keep much of the Compaq branding."

The companies haven't said which brands will survive. Hewlett-Packard has the edge, analysts say, because Carly Fiorina will remain chief executive and three of the four operating units will be led by H-P executives.

The decision may determine where the combined company will eliminate 15,000 jobs, and will affect suppliers, advertising agencies and the plans of rivals.

"Hewlett-Packard will be the surviving brand," H-P's Chief Executive Carly Fiorina said last Tuesday.

"We will use Compaq sub-brands that have power in the marketplace in a smart way." Hewlett-Packard last year spent about three times as much on advertising, US$1.1 billion, as Houston-based Compaq, which had a budget of US$370 million, according to the companies' annual reports.

By contrast, rival PC maker Dell Computer Corp spent US$431 million in its latest fiscal year.

Dell Chairman Michael Dell last week said that he expects to gain sales in coming months from H-P and Compaq customers who might be concerned about buying products that won't survive the acquisition.

"Our teams will be in full account-acquisition mode and addressing the fears and concerns that might be out there of customers," Dell said.

H-P is acquiring Compaq to add computer services and consulting, more profitable businesses than hardware such as PCs and servers. Both companies have been focusing on services, a strategy that has paid off for rival International Business Machines Corp.

IBM's services division has helped it weather slowing corporate spending because multiyear contracts to run other companies' networks ensure a steady revenue stream.

In terms of corporate identity, IBM will be tough to catch.

The company, which coined the term "e-business" in 1997, has the third-most valuable brand in the world, behind Coca-Cola Co and Microsoft Corp, according to Business Week.

Compaq and Hewlett-Packard didn't crack the top 10.

IBM built its Global Services franchise by adding consulting and network management. Combined with its eServer lineup and top-selling ThinkPad laptops, known among customers for reliability, the services arm has put IBM in the lead.

Compaq was founded in 1982, when three former Texas Instruments Inc engineers drew up an idea for a portable computer on a placemat at a Houston restaurant.

In 1986, Compaq was the first company to introduce a PC designed around Intel Corp's 386 microprocessor.

H-P, founded in 1938, invented the handheld scientific calculator in 1972 and added its first desktop mainframe in 1982. The company made its name by building better, cheaper computer printers.

In the PC market, Compaq's desktop Presario has been competing against H-P's Pavilion, the market leader in US retail stores.

"If you bought a Presario before, are you likely to buy one again? That's the question they have to ask," said Howe. "If you keep the Presario, that will confuse consumers about Pavilion."

Compaq PCs that are sold to corporations already are undergoing a name change.

Compaq in May consolidated five brands with names such as Desktop, Armada and Professional Workstation into one line, called Evo.

Compaq's Ipaq Pocket PCs are likely to survive, because the handheld organizers are more popular than H-P's competing model, the Jornada, analysts said. Compaq doubled its worldwide handheld market share to 16.1 percent in the second quarter, compared with H-P's 6.9 percent, according to Dataquest Inc.

Compaq makes three types of servers, thel computers that run Internet sites and data centers.

"On the server side, it's a tradeoff" on which brands might be kept, said Ashok Kumar, a US Bancorp Piper Jaffray analyst.

"Compaq is very strong on the high-end server. The low end has been made a commodity by Dell."
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