March 4, 2002 6:00 PM PST

HP, Compaq customers weigh in

A new survey shows that Hewlett-Packard's and Compaq Computer's corporate customers are narrowly in favor of the merger of the companies, although the largest percentage are still undecided.

Hampton, N.H.-based Technology Business Research found that 29.6 percent of customers are in favor of the deal and 24.3 percent oppose it, but 46.1 percent are still undecided. The analysis firm surveyed 243 Compaq and HP corporate customers between Feb. 25 and March 4.

Just as important, a majority of customers polled, 66.3 percent, said they would not consider switching to another technology provider in the face of a successful merger, while only 14.4 percent said they would consider switching, with the rest undecided.

As a result, TBR said the merger is having only a marginal effect on customers' decision of whether to stick with HP or Compaq.

Only 9.5 percent said they expected to be negatively affected by the merger.

The survey comes at a critical time in the battle over the deal, which faces opposition led by dissident board member Walter Hewlett and other entities related to the Hewlett and Packard families.

A key report from Institutional Shareholder Services is due Tuesday, which could tilt the balance of those in favor of the deal. Only a small number of institutions have gone public with how they plan to vote in a shareholder tally set for March 19.

Despite the uncertainties surrounding the merger, both Compaq and HP have managed to land multiyear, multimillion-dollar contracts for computers and services.

Since the companies first released their merger plan, Compaq has announced deals with Raytheon, Ericsson, American Express, the U.S. Postal Service, General Motors, General Electric Aircraft Engines and drug wholesaler Cardinal Health. In some of these deals, Compaq was the incumbent, but all were awarded through the open bidding process. The company beat out HP for at least two of the deals.

see special coverage: Big iron: HP to buy Compaq "The customers get the logic of the merger," Peter Blackmore, Compaq's executive vice president of sales and service, said in December. "We will have a transition for them. They trust us."

HP has also won multiyear contracts, sources say, but it has not been able to disclose all of them. Still, executives at Dell Computer have said that HP and Compaq customers have contacted their company with inquiries since the deal was announced.

The survey, which was conducted and paid for independently by TBR, also revealed details about other customer opinions of the deal.

When asked whether they believe the management team of the combined company could successfully complete the merger, 48.6 percent answered yes, 17.7 percent said no and 33.7 percent were undecided.

Most saw a limited or positive effect of the deal on their own company's information technology department. Nearly 60 percent said they believed the merger would have either no impact or a positive effect, while 9.5 percent predicted a negative impact. Nearly 31 percent were undecided on the effect to their IT department.

 

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