IDC: HP-Compaq Merger Wins High Marks From CustomersIDC: HP-Compaq Merger Wins High Marks From Customers

Six months after Hewlett-Packard closed its acrimonious purchase of Compaq, customers are satisfied with the execution of the deal, but the new company still has work to do, IDC said this week.

"HP has made impressive progress in its merger efforts," the market analysts said in a presentation.

Financial progress is good, but the company is still losing money in some business units. Headcount reductions, deeper than expected, have helped to reduce costs. And work done during the integration process apparently allowed HP to communicate effectively with customers about products and strategies.

More than half of users said there's been no change in their experiences after the company launch, which is an indicator of the progress HP has made, IDC said.

HP managed to avoid the mass customer exodus large companies typically experience after an acquisition, IDC said. Contributing factors for success included good communication; HP delivered a clear product road map and organized the sales force early on.

HP customers were highly satisfied with the acquisition's effect on the storage business, with less than 10% of respondents saying the acquisition had been bad for the storage group at either company, IDC said.

PC, handheld, and server customers are basically satisfied with the company's progress post-acquisition. The company needs to continue to develop innovative mobile products such as the Tablet PC and provide better financing and finance deals to larger customers.

The server group will be challenged by executing plans to consolidate from six server lines to two, IDC said.

The services group performed better than expected, IDC said. IT is well positioned to compete with the larger IT services players, including IBM. HP and Compaq proved to have mostly different line-ups of customers, IDC said. Because HP wasn't competing against Compaq for business, the service organization was able to minimize layoffs.

HP needs to develop close partnerships with some of the better-known management-consulting firms, such as Accenture and Bearing Point, to develop a reputation as an infrastructure provider. The company also faces a challenge in moving from a leading-edge, product-driven company to a services company for customers who don't always desire the latest technologies.

HP faces channel problems. Resellers of Intel-based PCs and servers are threatened by HP's increased emphasis on direct sales, fearing the company will rob resellers of sales. HP can have a strong direct-sales strategy without alienating resellers, but needs to do a better job of communicating with partners to achieve that, IDC said.

IDC interviewed more than 1,000 HP enterprise customers worldwide, plus 10 channel partners.

Not surprisingly, HP was pleased by the report. However, HP now needs to take advantage of the merger to introduce new technologies and services that combine the two organizations' strengths, said Jim Milton, senior VP and managing director of the Americas for HP.

Along those lines, HP plans to deliver new OpenView management tools, better integrating Compaq tools such as Insight Manager for server management. The company is developing Utility Data Center technology, in pilot today, to permit virtualization of data centers.

Said HP's Milton, "By no means are we declaring the job as done. I would look at the IDC survey as a milestone."