Resellers cautiously optimistic on HP/Compaq deal

Canadian resellers reacted with cautious optimism Tuesday to Hewlett-Packard Co.’s proposed purchase of Compaq Computer Corp., expressing hope the combined entity would maintain devotion to the channel as it delivers to resellers the efficiencies that come with consolidation.

“Compaq has historically had a much stronger reseller relationship,” said Harry Zarek, president of Richmond Hill, Ont.-based Compugen Systems Ltd. “My perception is they have more feet in the street walking the channel. Given that HP was fairly thin and Compaq had better coverage, they’d have to go for one model over the other.”

Under terms of an agreement, announced late Monday and still subject to regulatory approval, HP will purchase Compaq in a US$25 billion stock swap.

“Part of this amalgamation is streamlining services and trying to help their bottom line,” said Paul Furtado, vice president of corporate affairs for Audcomp Computer Systemsof Hamilton, Ont. “If that means moving away from the reseller channel, that’s a business decision.”

But Furtado suggested vendor loyalty would be important to the combined entity as a way to distinguish itself from direct-to-consumer behemoth Dell Computer Corp.

“I definitely think there’s some strong relationships with the channel that they want to maintain,” he said.

Harold Korsunsky, president of Winnipeg-based Kortex Computer Centre Ltd., agreed.

“We’ve seen the vendors attempt a variety of direct programs and they’ve yet to be successful with them,” he said.

Greg Myers, VP of marketing for Tech Data Canada said there was no cause for concern among resellers. Combining the two companies would present only opportunities for channel partners, he said.

“I think Compaq has been largely responsible for channel development in North America,” he said. “(And) I don’t think you have too many vendors that have a higher percentage of sales through the channel (than HP).

“I see this as an opportunity for the new company to dominate the channel.”

For their part, both Compaq and HP noted the importance of channel partners in a potential-combined strategy during conference calls Tuesday.

“Clearly this combination strengthens our ability to effectively leverage our channels,” said HPchairwoman Carly Fiorina. “We’re talking about our direct distribution model for PCs; we’re also talking about our extensive network of channel partners. One of the key drivers of value here is our ability to aggressively use those channels.”

Added Compaq CEO Michael Capellas: “On the commercial side there is no question that we will continue to drive with a strong balance on both direct distribution as well as using our distribution partners. We use the same distribution partner in many cases.”

Resellers echoed Capellas’ expectations of increased efficiencies from combining the two companies. Korsunsky said Kortex was actually looking at reducing the number of vendors it deals with before Tuesday’s announcement. He said keeping his staff up to date on such a large number of products is very time-consuming, and less vendors means more devotion to each one.

“I always believed there was over-distribution and this brings two down to one,” he said. “It will make our lives a little bit simpler and bring some efficiency to the marketplace.”

“Hopefully it will streamline things,” said Audcomp’s Furtado. “There’s no need to carry four different types of DLT drives.”

Furtado and Compugen’s Zarek cautioned short-term hiccups might precede longer-term efficiencies in the actual combining of the two operations.

Either way, resellers agreed consolidation is something they are going to have to get used to. Zarek foresees the industry being whittled down to just three players, IBM, Dell and a Compaq/HP entity. Kortex’s Korsunsky said the smaller PC players face a tough future.

“We’re going to see continuing consolidation in the marketplace,” he said. “(Clones) are not going to survive. I’d be shaking in my boots if I were a clone builder right now.”

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Jim Love, Chief Content Officer, IT World Canada

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