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.
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.
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.