Mammoth merger of battered but not yet beaten tech giants

{EDITION} The proposed melding of technology industry giants Compaq and Hewlett-Packard will, if approved by regulatory authorities…

{EDITION} The proposed melding of technology industry giants Compaq and Hewlett-Packard will, if approved by regulatory authorities in the US and Europe, prove to be either the making or the downfall of the latter's dynamic but embattled chief executive, Ms Carly Fiorina.

Ms Fiorina stepped into the top job at Hewlett-Packard in July 1999 as the Silicon Valley pioneer was showing signs of age and a lack of focus. Hewlett-Packard had nearly missed the boat in terms of understanding the significance of, and tailoring its service and product offerings around, the internet.

The company sprawled across hundreds of divisions, some of which duplicated efforts, all of which maintained a confusing management structure where people often weren't sure who had responsibility for what and reported to whom. Ms Fiorina came in and stripped the corporate structure back to a handful of clear divisions, cut out much of Hewlett-Packard's fat, and began to build up competence in internet services.

But then the economic slump pummelled the company.

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To her credit, Ms Fiorina was the only major corporate chief executives in the technology industry to state honestly that she did not see an end to the downturn any time soon. She was one of the very few not to try to enact a blatantly false song and dance about very short-term troubles and a imminent turnaround in fortunes for analysts and journalists.

Nonetheless, Ms Fiorina, already under intense scrutiny, has endured criticism for not turning Hewlett-Packard around according to plan. She has been accused both of having been too radical in streamlining the company and for not having been radical enough in hacking it back.

In the background to many evaluations of her performance have lurked uglier questions of whether a woman can run a technology company, much less one the size of Hewlett-Packard. Curiously, no one has yet raised the issue of the relevance of the manhood of Gateway's Mr Ted Waitt, Cisco's Mr John Chambers, or Intel's Mr Craig Barrett to the very poor performance of their companies in the same downturn.

The proposed merger with Compaq has, of course, raised such questions again. Perhaps the merger will be rejected by regulators and we will never know whether this new behemoth would have flown or fallen. If it does go through, observers - and the markets - will expect to see the benefits Compaq and Hewlett-Packard are touting sooner rather than later.

If the giant turns into a dinosaur, Ms Fiorina will be on the firing line.

The new entity would become the second major merger in half a decade for Compaq, and represent the elimination of yet another of the grand old names in computing as Compaq is absorbed into Hewlett-Packard as inexorably as Digital before it was absorbed into Compaq.

Compaq is one of the veterans of the new economy - the very first of the hungry young companies to recognise in the 1980s that a surprising new market was emerging for "personal" computers that people would buy for their homes and offices.

Compaq was at the forefront of the democratisation of computing, yanking it out of the closed, air-conditioned rooms of the corporate mainframes and onto millions of desktops. Compaq also has contributed to technology's archetypal myths - this is the company that was conceived on the back of a napkin in a restaurant, as the legend goes. Many viewed with great irony Compaq's buyout of Digital, one of the few names remaining from computing's first wave, as surprising a move and as representative of a new computing world order as AOL's buyout of media monolith Time-Warner.

Now, new economy Compaq will disappear into one of the older pioneers - Hewlett-Packard emerged in vestigial form as a company producing engineering instruments in the 1930s.

Hewlett-Packard was the true innovator and corporate iconoclast of its generation, one of the very first technology-oriented companies to base itself in what would eventually be known as Silicon Valley. It completely overthrew all received notions of how to run a company - removing layers of management, allowing employees to wear less formal clothing, offering a supportive environment of employee perks.

Decades after its founding, Hewlett-Packard's arteries had begun to harden with older-style management structures and a loss of the dynamism that once propelled it to the front of the tech industry.

Likewise, Compaq has grown to a lumbering size and left behind its former youthful energy and willingness to take risks.

No-one could accuse Ms Fiorina of playing it safe by pursuing the merger of the two companies.

Perhaps the union will invigorate two giants that have endured a mighty battering in the current economic climate. Or maybe this mammoth new firm will simply ossify further, to be surpassed by more nimble competitors.

Ms Fiorina is betting the house on the former.

Karlin Lillington

Karlin Lillington

Karlin Lillington, a contributor to The Irish Times, writes about technology