By John G. Spooner, 14 February 2005 09:10
NEWS
In a report issued on Friday morning, Andrew Neff, an analyst with Bear Stearns, predicted that under the right circumstances, HP might seek to purchase Gateway.
Several things would have to fall in line for HP to make a move. The computer giant has to replace ousted CEO Carly Fiorina. Second, that replacement would have to move to spin off HP's PC business, Neff wrote in his report. But by combining its PC business with Gateway's, number two Hewlett-Packard would gain greater scale, thus getting a boost in its efforts to compete against rival Dell.
HP, which has struggled to increase its PC shipments as quickly as Dell in recent quarters, ousted Fiorina on Wednesday. However, Bob Wayman, HP's chief financial officer and interim CEO, said at the time that his company doesn't intend to alter its fundamental structure, suggesting that radical measures such as spinning off the PC business won't come in the short term, while it searches for a new CEO.
Nonetheless, Neff wrote, "If the new CEO decides to get out of the PC business, our prediction is that a Gateway-HP combination is the most likely outcome."
Consolidation has been no stranger to the PC industry in the last few years, and some analysts believe that even more could be on the way, as unit shipment growth rates are forecast to slow after 2005. HP bought Compaq in May 2002; Gateway bought eMachines in March 2004; and IBM plans to sell its PC business to China's Lenovo Group this year.
During the same period, Dell has grown to become the world's top PC manufacturer. Dell finished 2004 with a market share of 17.9 per cent, versus number two HP's 15.8 per cent and third-place IBM's 5.9 per cent, according to IDC.
"Using similar reasoning that led us to predict the Compaq-HP merger (i.e., not a great idea, but Compaq had to do something and HP was the only viable buyer), we think that a Gateway combination with HP's PC operations could be the next industry consolidation move - although the timing will need to wait for new management to settle in at HPQ," Neff wrote in the report.
David Hallisey, a Gateway spokesman, said: "We're focused on our strategy of being a leading provider of high-quality, high-value PCs for professional customers and consumers, which we believe is the right direction for our customers, shareholders and employees."
HP spokesman Robert Sherbin declined to comment.
John G. Spooner writes for CNET News.com.
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1. Gene Pharr
That could easily be the dumbest move in IT history.