HP, Compaq merger could be good for Apple

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Columnist Charles Haddad thinks that the marriage of HP and Compaq, if consummated, would be good for Apple and the Mac for a variety of reasons.

In his " Byte of the Apple " column, Haddad said that Apple and Dell aren't really big competitors. Apple competes more against HP and Compaq, he said.

"Dell sells online and through catalogues, its primary customers are companies and businessmen," Haddad writes. "Although Apple's online sales are growing smartly, the company still sells largely through retail outlets. Its customers are home users, students and artists. And that pits Apple directly against HP and Compaq, which dominate the consumer market for PCs ... If HP and Compaq wed, odds are good that one of these well-known consumer brands in PC retailing will disappear. That thinning of the marketing clutter should help elevate Apple's already lustrous brand name among consumers."

By this time next year, shoppers at CompUSA could have only three choices: HP, Sony or Apple, he said. The columnist doesn't suggest that "loyal" Compaq fans will suddenly switch to the Mac, but thinks that first-time buyers might be more likely to seriously consider a Mac now that the choices have been narrowed a bit.

The demise of Compaq (assuming it's the brand that goes) might also free up shelf space in big retail stores for Apple products, Haddad added. What's more, the merger might also "bury the hatchet in a savage price war" in which "Apple has tried to play Switzerland, an oasis of price stability."

"The strategy has worked to some degree, keeping Apple's margins relatively healthy," Haddad said. "Still, the company has not gone unscathed. Eighteen months ago, Apple's computers sold for roughly the same as PCs. But today, a Mac on average is twice the price of a comparable HP or Compaq. That has to hurt Apple's ability to attract first-time users, the key to expanding its long-stagnant installed base. If PC prices stabilize and then drift back up, Macs will look more attractive to price-conscious comparative shoppers."

Best of all, the head honchos at both Compaq and HP want to scale back, if not exit, the personal computer business and concentrate more on computer-based services after HP and Compaq forced it out of the retail PC business. And that could be a great thing for Apple, the columnist says.

"HP and Compaq would be leaving the PC business just as it's about to take off again, I believe," Haddad said. "Both Apple and Microsoft are working hard to reinvent computers as all-purpose digital hubs."

HP announced plans to acquire Compaq in a stock swap. It was one of the largest deals in technology history. However, investors haven't been impressed and both companies' stocks have taken a dive.

Unlike some mergers, which have "collars" -- share price thresholds where one of the companies can walk away from a deal -- HP's deal with Compaq is at a fixed ratio, meaning the two companies -- and their share prices -- are "connected at the hip," according to CNET . The terms of the deal call for every share of Compaq stock to be exchanged for 0.6325 of a share of HP stock.

This story, "HP, Compaq merger could be good for Apple" was originally published by PCWorld.

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