Compaq Computer is set to complete its $9,6bn acquisition of computer and services group Digital Equipment Corporation with the appointment of a new management team.
The move is significant in that Compaq`s potential in the marketplace will only be realised if it separates its traditional "box moving" activities from its enterprise focus, gained with the purchase of Digital.
This is the view of Peter Cheverton, MD of DNS Entity - South Africa`s only Digital Premier Value Added Reseller (VAR).
Cheverton says that while the channel welcomes the Digital acquisition by Compaq - because of the synergies between the two organisations in both marketing and technology terms - it was sensitive to a merger of their distribution lines.
"From the Compaq perspective, the company has been very successful in moving high volumes of product through its channel infrastructure and its marketing has been excellent.
"However, in South Africa where the competition from `clone` vendors is still a key factor, the profit margins for Compaq`s products have been significantly eroded," he says.
"This has not had a negative impact on Compaq`s position. On the contrary, because the company has been able to sell its offerings at competitive prices, its market share has risen.
"Digital products, on the other hand, are sold into the corporate environment and the Alpha offerings in particular require technical expertise and support.
"Should these products be marketed with a similar philosophy to Compaq`s PC offerings - through the Compaq channel - an erosion of margins could occur."
Cheverton warns that once profit margins drop, the expertise needed to adequately support the product becomes too expensive and falls away.
Should this happen Compaq will not realise the huge potential of 64-bit Digital technology and will limit its ability to successfully broaden its horizons into the high-end corporate marketplace.
"On the positive side, however, the acquisition of Digital will benefit the users by giving them access to a wider product and technology selection.
"Compaq is a leader in industry-standard computing through its market share of Windows NT, SCO UNIX and NetWare.
"The company can be expected to extend its leadership position in Windows NT and, leveraging Digital`s technologies and extensive world wide services and support for Windows NT, offer users a Windows NT solution environments which extends from the small business to the most demanding enterprise."
Cheverton predicts that Compaq will also place significant emphasis on 64-bit computing with Digital UNIX and Alpha-based systems.
"Although the Digital Alpha did not do as well as was expected in sales terms, this was down to Digital`s failings as marketers more than any shortcomings in Alpha technology.
"With Compaq`s marketing track record and Digital`s technology leadership the company could become the world leader in the computer hardware arena within the next three years," he adds.
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