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Dell says Compaq-HP deal faces challenges

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CIOL Bureau
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SINGAPORE: Michael Dell, the head of No. 1 personal computer maker Dell

Computer Corp, said on Monday if the proposed HP-Compaq merger goes ahead the

new entity would face big challenges in bringing costs down.

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Hewlett-Packard Co. and Compaq Computer Corp. face a make-or-break

shareholder vote on a proposed $21 billion merger on Tuesday. Analysts say it is

still a toss-up whether the contentious deal will go through.

"It is one of the more interesting merger battles that has gone on in

all of corporate history, and certainly one that we are paying a lot of

attention to," the CEO of the Texas-based company said at a function for

the American business community in Singapore.

"On the one hand, according to data presented, these companies need to

do something to drive their costs down. Perhaps combining them is one way to do

it," he said. "However, there is data around that shows merging large

companies together...is not exactly promising. There are challenges to making

that happen," Dell said.

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Dell Computer has been able to take advantage of last year's industry

consolidation to build market share. "Dell has benefited well from the

consolidation," he said. "Dell's market share has been

increasing." On the outlook for Dell's US business this year, Dell said he

was hearing a fairly conservative tone from customers.

"US business has shown a little bit of movement but it was difficult to

see whether it is a real pick up in capital spending or just Dell gaining market

share," he said. Dell Computer has led a price war that has helped it win

market share and capture the top spot from rival Compaq, now the second largest

personal computer maker.

But PC demand has slacked off because the economic downturn has dampened

buying by consumers and corporations, and the computer company is looking to

find new areas for growth.

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