Today, I'm writing to ask the major computer retailers who offer both Compaq Presarios and Hewlett-Packard Pavilion desktops to drop one line or the other. Why? To maintain competition and innovation in a marketplace where one company now plays too large a role.
I'm thinking about this after reading the Product Roadmap issued this week to describe the "new" Hewlett-Packard. Referring to Presario and Pavilion, the roadmap says, "The two brands will compete and we will continue to market the unique value proposition of each."
SAY AGAIN? I purchased two desktop systems this past Christmas, one a Compaq, the other an HP Pavilion. If there was a unique value proposition separating the two, it was completely lost on me. Are these two brands supposed to stand for something different? Does anybody outside--or even inside--the company understand what that something might be?
HP is smart--in a wily sort of way--to keep the two brands on the market. In many retail stores, it's pretty hard to find a desktop for sale--beyond the occasional Sony or the store's own brand--that isn't a Compaq or an HP.
By commanding so much shelf space, spread across two big brands, HP offers customers what appears to be a choice. But if it's been hard to differentiate these brands lately, what happens post-merger, when the brands no longer need to compete with one another? How different will they be then?
HP has every reason to keep the pricing of the two brands as comparable as possible--and as stable. Gone are the days of HP or Compaq forcing the other into a price war. And in many stores, there's really no other company that can play the game.
SOME OF YOU out there might be asking yourselves: Why on earth should resellers care about these implications of the HP-Compaq merger, much less do anything about it? I can answer that in two words: Michael Dell.
The less competition there is at retail, the better a Dell (or for that matter any of the other direct brands) looks in comparison. If Presario and Pavilion become nothing more that different badges on essentially identical products, and storefront competition wanes, the direct channel will pick up even more customers.
What the PC industry needs is greater competition and real innovation. The HP deal removes only one potential source of that innovation from the marketplace. Maybe HP will prove me wrong. But the precarious financial state of the industry--which pushed the two companies together in the first place--makes me feel pretty confident it won't.
HP has two quarters to show some significant upside in its PC business as a result of the Compaq acquisition, or else it will appear that maybe Walter Hewlett was right. He said the deal would gave HP too much exposure in the commodity PC business.
While HP is holding onto essentially the same exposure in the consumer market, it has wisely decided to deep-six its own line of business desktops and laptops. Will those customers slide over to Compaq-branded machines?
I DOUBT IT. Score another one for Michael Dell, the darling of corporate PC purchasing. Big companies have decided that the Dell model works best and saves them money. That's why both Compaq and HP were in trouble in the business PC market before the merger. Nothing about the deal changes that equation.
My bet is that business desktops, and perhaps even laptops, will become a loss leader for HP, a business the company stays in to protect its other hardware lines. As for consumer PCs, unless HP really does make its two brands competitive, I expect only one will survive the next 24 to 36 months.
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