John C. Dvorak

Someone said the HP purchase of Compaq was like a snake eating a porcupine. HP says the deal will create synergy. The last time anyone said anything seriously about synergy was back in the late 1960s, when the so-called go-go market was booming, and companies were purchasing each other like crazy to create "synergy" and "synergistic companies." Synergy didn't work then, and it won't work now. The porcupine analogy is more apt.

Let's not forget that Compaq already botched its buyout/merger with Digital Equipment Corp. (DEC). (I won't even get into the Tandem deal.) At the time, DEC had the foremost service organization, arguably the best and fastest Web servers on the market, the premier high-performance microprocessor in the Alpha, and a great reputation for engineering excellence. Compaq bought them, and all those strong attributes disappeared. The deal was a complete waste of time and money. Worse, Compaq had so much trouble swallowing DEC that Compaq choked and began to falter itself. It was having trouble competing with Dell. It couldn't use DEC for leverage at all. Compaq's computers began to turn up at Costco instead of Packard Bell's.

Some of Compaq's problems are due to the industry slump. Some others are due to Dell, and some are due to plain old bumbling. However, Compaq's core competencies have historically been strong. Here is the company that basically invented the portable PC. Compaq was an early notebook competitor and should, by all rights, dominate the notebook arena. As far as notebook computers are concerned, though, the company is now a laggard. How did IBM, Toshiba, and Sony take over? If not for the popular iPAQ machine, Compaq would have nothing going on. Exactly what happened? And has anyone ever mentioned to them that their desktop machines are more than a little homely? When I see one, I immediately think of a Studebaker. So exactly what does HP think it's going to get out of this latest deal to create synergy?

Now let's think about HP. Here is a company that has lost its way. Once known throughout the universe for high-end instrumentation and extreme quality control, HP is now known for cheap inkjet printers and also-ran minicomputers. The new company hopes to compete with IBM in the services business. Can these folks make up their mind about what they want to do?

When HP CEO Carly Fiorina sent out a memo to employees bragging about this great merger, she spent an inordinate amount of energy discussing how the front/back organizational model dominates both companies, and how this will somehow save the day. There is little reference to the front/back model on the Web, but this appears to be a new buzzterm. Stanford has a seminar on it. Basically, the front/back model says companies should be more customer-centric in a more organized way--or some such blather.

Fiorina also went on and on about how solutions are more important than technology. Customers want solutions, she stressed. I found this amusing, and a friend of mine recently commented to me, "Have you noticed that once companies start to de-emphasize technology they go downhill?"

Selling solutions sounds grand, and the idea gets a lot of lip service. However, people still buy technology. Try selling the world's greatest solution on an 8-bit computer in a market of 32-bit computing. IBM sells truckloads of ThinkPads--and not because these machines are solutions. The machines sell because they are cool looking, and high-tech achievements. We already know what we want to do with ThinkPads. We don't need a solution. We have a solution. We need the machine.

Fiorina, with her front/back talk, seems preoccupied with organizational structure. She's getting close to the brink of disaster mucking with the structure of HP. It's funny how well the company did historically with its previous internal structure, which suddenly is apparently no good. Did that structure really need to be shaken up?

An organization like HP evolved naturally, and its current structure is roughly comparable to "spaghetti code." With spaghetti code, changing one thing produces bugs someplace else, for unknown reasons. The best way to deal with that problem is to leave the spaghetti code as intact as possible, and begin new code bases from scratch--away from the spaghetti. What would make more sense, in the case of HP, is to build new divisions from scratch--outside the HP spaghetti organization. Instead, Ms. Fiorina mucked with the spaghetti organization as soon as she could. Now her message is "let's bring in another big, complex organization and spend all our energy figuring out who to lay off." As we all know, nobody ever gets the layoffs right. The professional deadwood types make themselves look important, while the important folks take their security for granted and end up getting fired.

What will come of all this? Instead of having two important companies around, we'll end up with a slightly bigger HP, which will probably be losing more money than expected. The whole mess will result in some enormous write-off, and the deal will eventually be seen as a big mistake. The Houston folks will be marginalized and become an outpost. Someone will replace Fiorina, and as part of a cost cutting move, the new CEO will close the Houston operations. The stock will go up, and people in Houston will say to themselves: "Hey, what just happened?"

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