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Unformatted text preview: s such as services
and high-end enterprise servers. At the time of its acquisition by Compaq, DEC’s services
business had been number three in the industry. Twice before, in 1995 and again in 1996,
Compaq tried to acquire just the services portion of Digital, but was rebuffed when a price could
not be agreed. By 1998, DEC had been performing so badly that Compaq was able to buy the
whole company. That meant that Compaq acquired DEC’s high-performance, 64-bit processor
called Alpha, its group of services customers, and a line of products that were largely
complementary to Compaq’s.
By most accounts, Compaq botched the DEC merger integration. Compaq had been slow to
blend DEC into its portfolio, perhaps distracted by the turmoil in its core PC business that
emerged at the time. Compaq was losing money and slipping behind IBM, Dell and HP in PC
sales. According to The Economist, Compaq hired three consultancies to advise it on integration
strategy and set up more than 200 internal committees to discuss DEC’s integration, but made
little real progress.13
Compaq was not able to successfully deploy DEC’s service arm. DEC’s customers were reputed
to be loyal to the company, but Compaq rebranded all products and services under its own name,
which carried little cachet with DEC’s customers. Cultural differences between Compaq and
DEC persisted after the merger.
In making a bet on scope and scale, Fiorina wagered a huge amount of HP’s resources and the
shareholders’ value on her vision for the future of the technology industry, and the ability of
companies to provide differentiated technology solutions to a wide variety of needs. Fiorina
said, “Technology now is so critical to business success, it is so central to solving fundamental
problems like healthcare—it’s so much a part of the fabric of life—that customers are no longer
going to be willing to make the kinds of compromises and tradeoffs that they used to make.” By
combining HP with Compaq, Fiorina planned to offer, under one roof,...
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This document was uploaded on 02/16/2014 for the course MGMT 237 at UPenn.
- Spring '14