From the numbers on the share prices to the outlook from industry and financial analysts, HP’s proposal to purchase Compaq could find no smooth path to acceptance in its first week. Stock prices plunged for both HP and Compaq on the announcement, diving to record lows for both companies. While it’s not unusual for a company making an acquisition to see its stock drop on such news, the company being purchased usually sees its shares rise. About the only thing rising in the first week after the merger announcement was the wrath of shareholders, watching HP’s price plummet by 25 percent in just three days of trading. The Compaq shares slid 16 percent in the same period. The deal, which was valued at $25 billion the day it announced, was down to just $19.06 billion because of HP’s plunging share price. HP has never lost this much of its market capitalization in so short a period. The Los Angeles Times carried comments from an merger expert at Stanford — HP CEO Carly Fiorina's alma mater — saying there was "significant risk" the deal could be killed by shareholders of either company. Even short term stockholders would vote against the merger, thinking that by killing the deal it would drive up HP's share prices.

The dismay over the deal runs deep, starting with its focus on merging two PC competitors at a time when PC sales are in full retreat. Other analysts point to the serious overlap in the companies’ products, saying so much duplication can’t possibly be resolved with only 15,000 layoffs during the next two years. The value to the shareholders has also been questioned repeatedly. “This has all the makings of disaster du jour,” said analyst Ashok Kumar of US Bancorp Piper Jaffray in an interview on CNN. Many analysts noted the expected profits of $2.4 billion expected in fiscal 2004 come largely from savings through layoffs, not through business growth. HP said it expects to do five percent less business in each of the next two fiscal years if it gets to acquire Compaq. Gartner Group analysts were predicting the merger would not complete, because of product line conflicts, excessive layoffs, and regulatory hurdles.

As the entire HP product line goes in for scrutiny during the next three months, some media sharks were already circling the longest-lived platforms. Few customers were responding with anything but dismay over such doomsaying in the public forum. HP’s Jim McDonnell, vice president of worldwide marketing for the company’s business customer unit — and a manager frequently quoted on the wonders of Unix and Linux — was quoted by CNET as saying that HP would move toward Unix, Linux and NT. He also had to admit the 3000 platform was “well-leveraged” in HP’s business. McDonnell was quoted as saying analyst criticism of the deal was “superficial,” a curious term for millions of words and hours of study. While McDonnell didn’t explain his “well-leveraged” comment, it appeared to be an admission that the platform has friends at very large HP customer sites. That fact is on record in the 3000 community. And the e3000 division’s general manager has said those companies would be very upset if their 3000s were phased out in any way. CNET reported, “The challenge will lie in coming up with a product road map that will push customers toward a more streamlined operating system portfolio without alienating them.”

And what a challenge it will be. And has been, because such an attempt is hardly news. The 3000 installed base has been through this kind of scheme before, and the customer community turned the barbarians away at the gates in the middle 1990s. Now, because HP's CEO wants to absorb Compaq — in a deal that shareholders have ample reason to kill, and regulators may well block — some in HP get to try to homogenize technology again. So long as HP continues to listen to customers, who want diversity in choosing platforms, such speculation in these uncertain times has most of its value in the tabloid, entertainment vein.