Together at Last (Part II)

(Part II of II)

Isn''t this another blow to
Houston? Houston has had a rough time lately -- a devastating flood; layoffs at one of its largest employers, Continental Airlines; the Enron debacle; and the planned acquisitions of several other big companies, including Pennzoil. That means tough times for the rank and file. Unemployment in Houston hit 6.5 percent in January, the highest rate in almost three years, and in February it fell only slightly, to 6.2 percent.

Houston business leaders are putting the best possible face on the merger, but the bottom line is that the city stands to lose something intangible but highly valuable: bragging rights as the home of one of the world''s best-known computer companies. Compaq has had such a visible presence in the city and the tech industry that it did a lot to change outside perceptions that
Houston was just a one-trick pony, an oil-and-gas town. "Compaq has been the first name we put out when we try to sell Houston," said Jim Kollaer, the president and chief executive of the Greater Houston Partnership, a leading business organization that studies issues like public policy development, transportation infrastructure, and workforce education. Compaq''s name is splashed on buildings all over the city, including the high-profile Compaq Center. The company is a corporate sponsor of events like the Compaq Marathon and teams like the Houston Rockets. What happens to its role as a prime corporate giver? "Compaq has always been a good corporate citizen, committed to Houston. That won''t change," Capellas vowed. He added that Hewlett-Packard is well known for its support of the communities in which it has operations. "In that sense, the merger is a perfect cultural fit," he said.

Won''t Compaq lose its identity? Next to Texas Instruments, no high-tech company in
Texas had a higher profile before Dell came along. Compaq was born at a House of Pies in Houston, in 1982, as three former Texas Instruments employees -- Rod Canion, Jim Harris, and Bill Murto -- sketched an idea on a place mat for a portable IBM-PC clone. In the same way that Apple Computer co-founders Stephen Wozniak and Steven Jobs became symbols of California''s Silicon Valley, Compaq''s co-founders came to represent what was possible on the Silicon Prairie. At a time when Texas'' economy was shifting from one dominated by oil and gas to one tied more to services and technology, Compaq was a pioneer in the New Economy before most people realized there was a new economy.

After the merger with Hewlett-Packard was announced, I heard many people say that it would be a shame for Compaq''s corporate identity to disappear. Capellas said that won''t happen. "The naming of the company is one thing; driving the value of the Compaq brand name is another," he said. "We will, in fact, leverage the Compaq brand name as we roll out different product sets. . . . You will see the Compaq brand used quite fully in the new company."

Aren''t you aiding the enemy? None other than Jack Welch, the former General Electric chairman and business guru, warned Fiorina about that possibility. "Your competitors want this deal to go through," he told her during an interview on CNBC. "It will create chaos. They will clean both your clocks while you''re doing all this." Indeed, Dell executives said they are picking up some business because of the uncertainty created by the merger plans, especially in providing packaged solutions to corporations, where Dell hasn''t had as large a presence as Hewlett-Packard, Compaq, and IBM. Dell hopes to double its revenues over the next four or five years to $ 60 billion, and to do that it must get a strong foothold in the corporate world. And corporations are listening to what Dell has to say. "More and more doors are opening up to us," Kevin Rollins, Dell''s president, recently told Wall Street analysts.

Capellas, though, said Compaq and Hewlett-Packard never "took their eyes off the ball" while the merger was going through the long approval process. "We are striving to make this merger transparent and seamless for our customers," Capellas argued. "That is very bad news for our competitors who have been saying we''ll be distracted." He pointed out that since last September, Compaq has signed $ 900 million in data-storage contracts with clients like Dollar Rent A Car and
Harlingen''s Valley Baptist Health System.

Okay, time to tally up the columns of wins and losses and see if the merger is a deal or a dud for
Texas. I can appreciate the cold, hard business sense of putting Compaq and Hewlett-Packard together, but I personally don''t like the idea. The odds of combining two companies with different corporate cultures seem too great to gamble with the livelihoods of thousands of people and a company that has been one of the stalwarts of the Texas tech industry. Call me sentimental, but the deal makes me a little sad. Part of my ambivalence about the merger lies with the fact that I wrote about Compaq when it was a feisty young start-up that bet everything on a new idea. It was an exciting time, years before PCs became a commodity business and Compaq became a big corporation gobbling up companies like Digital Equipment and Tandem Computers before it, in turn, got gobbled by a bigger fish.

I dug into a box recently and pulled out several yellowed newspaper clippings about Compaq with my byline. They seem almost quaint now -- one was about a "high-end" Compaq computer unveiled in 1984 with 640 kilobytes of memory. Today, of course, memory is measured in megabytes or more. As I put the articles back in the box and closed the lid, I felt a bit like I was closing a chapter in
Texas'' business history. And when the next chapter is written, I wonder where Compaq -- er, Hewlett-Packard -- will stand.
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