Top Line: September 10, 2001

Take two struggling hardware companies, put them under one roof, and what do you get?

HP, Compaq: Now, For the Hard Part

Take two struggling hardware companies, put them under one roof, and what do you get?

The answer to that question will make or break Carly Fiorinas career at Hewlett-Packard.

From Wall Street to Main Street, HPs decision to buy Compaq Computer for $21 billion in stock is drawing skepticism.

Together, Compaq and HP will nearly match IBMs annual revenue. Under terms of the merger, HP CEO Fiorina will retain her title; Compaq CEO Michael Capellas will become president of HP; and the Compaq name will cease to exist.

The proposed merger, announced Sept. 4, wont be completed until sometime next year. And it could take HP several months to produce a unified partner strategy that blankets current HP and Compaq resellers.

The road to the merger was a long one. In recent months, Compaq and HP both vowed to bolster their consulting practices, in a bid to better emulate IBM Global Services.

HP evaluated a potential buyout of Pricewater- houseCoopers last fall. More recently, Compaq pursued Proxicom, a small IT consulting firm.

However, neither deal came to pass, leaving IBM Global Services to stretch its lead in the consulting arena.

Quarterly revenue at IBM Global Services is roughly $8.7 billion, or about 140 percent higher than the combined consulting operations at Compaq and HP.

The HP/Compaq deal furthers HPs worldwide reach on numerous fronts, like PCs, servers, storage and Unix systems.

However, HP will need to quickly sort out its product portfolio, taking the best from Compaq—such as the Proliant server line and the iPaq handheld business—and scrapping the rest.

HP plans to cut roughly 15,000 employees as part of the merger, but its unclear which product groups—if any—will be shown the door.

Moreover, HP will need to appease enterprise customers that run Compaqs niche high-end systems, including the Himalaya line (acquired from Tandem) and Tru64 Unix (acquired from Digital).

"A lot of people are skeptical [of the deal]," says Laurie McCabe, VP and practice director at Summit Strategies, a high-tech consulting firm. "Compaq and HP were deep in the shadow of IBM. Theoretically and strategically, the deal may make sense. The problem is they have duplicate everything."

Not for long.

NEC Preps U.S. Invasion

Move over, Cisco. NEC is set to invade the U.S. market with a complete line of voice and data networking gear, Smart Partner has learned.

NEC makes phone switches, as well as Layer 2 and Layer 3 switches, and it builds ATM switches and routers for the Nortel Centillium line.

However, much of NECs data gear has yet to be released in the United States. A full assault on the U.S. market is expected within a few months.

"Give them six months, and NEC could have quite a comprehensive story to tell in the data market," says Peter Marquis, regional director of data solutions at Expanets, an Amityville, N.Y.-based integrator.

Big Partners, Tiny Server

Check Point and IBM/Lotus have high hopes for Celestix Networks, a two-year-old server appliance maker. Celestix next month is expected to unveil a security appliance that features Check Points firewall software. Separately, Celestix has developed a groupware appliance that runs Lotus Domino. For information, see partners.php.

Nortel Holds A Fire Sale

Nortel Networks has put its Clarify business on the block and may exit the CRM software market.

The company hopes to sell Clarify for about $400 million—a far cry from the $2.1 billion that Nortel paid for Clarify in 1999.

Potential buyers include SAP, Amdocs and an investment firm, according to Clarify partners. Nortel and SAP declined comment for this story; Amdocs could not be reached for comment.

The potential Clarify sale would be a dramatic about-face for Nortel, which had hoped to leapfrog Siebel Systems in the CRM market.

The collapse of Nortels networking business, however, hasnt helped matters. For the six months ended June 30, Nortels net loss from continuing operations was a staggering $19.01 billion.

Fitting Name

The exodus at Exodus Communications continues. The latest departure is that of CEO Ellen Hancock, who resigned less than a month after three board members stepped down from their posts.

Exodus stock trades for less than $1 because many analysts think the company will run out of cash before years end.

Exodus has a history of loose purse strings. Executive VP Richard Mattern, for instance, was eligible for a $70,000 bonus after serving 90 days at the company, according to his April 11, 2001, offer letter, which is part of a recent SEC filing.

Board member L. William Krause will replace Hancock as CEO.

Lets Make a Mini-Deal

Small consulting teams are a hot commodity. Just ask Answerthink and Ciber Inc., which are making mini-acquisitions to boost their software expertise and geographic coverage.

Answerthink recently acquired an SAP development team from Condor Technology Solutions Inc.

Answerthink will pay Condor $2 million in cash, plus an additional $750,000 if the SAP group meets certain financial goals for the remainder of the year.

Answerthink already has Oracle, PeopleSoft and Lawson Software practice areas.

Meanwhile, Ciber last week acquired Century Computer Consultants Inc. of Overland Park, Kan. Under terms of the deal, 70 consultants and developers will join Cibers Kansas office.

Ciber says Century is a small but profitable business—an impressive feat in this market.

Help Wanted At Cisco

Cisco Systems is interviewing internal and external candidates to replace senior worldwide channel VP Tom Mitchell (pictured). Mitchell is taking a leave of absence to spend more time with his family. Sources say a replacement is expected within a few weeks.

A Whole New World

IBM next year will migrate its Tivoli allies to the companys Partner- World program, Big Blues umbrella initiative for business partners.