September 6, 2001 ; 10:34 PM

Ned Crabb, Letters Editor

THE WALL STREET JOURNAL

New York, NY

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Subject: A letter to the editor re. “The HP-Compaq Deal” - a WSJ editorial (Sep. 6, 2001)

Dear Ned,

The Journal editorial “The HP-Compaq Deal” (WSJ, Sep. 6, 2001) argues forcibly against antitrust enforcement and for unfettered competition.  You cite two computer deals - HP/Compaq and Fujitsu/Siemens - to back up your arguments.  You’re off the mark on both counts. 

In each merger, the marketplace, not the courts, punished the management for falling on its own sword.  The drop in shareholder values had little to do with antitrust laws or their enforcement.  Investors ran away from these stocks because the four companies are the typical industrial era hardware dinosaurs that could not adjust and adapt to the new IT services-driven world.  Their top executives lacked the vision and the foresight to anticipate the future, preferring to milk their hardware cash cows instead.  Until they started to dry up, dragging down with them shareholder values.

By contrast to the editors, the Journal’s team of technology reporters seems to understand very well which end is up in the IT industry.  They picked a good title ("A Few Survivors...") for the table in today’s (Sep. 6) story, "The New Computer Landscape…," and an even better suffix ("..., So Far").  Indeed, most of these computer companies are living on borrowed time, as the industry has shifted from hardware to services, while these hardware vendors’ strategies have not. 

You cannot blame antitrust laws for that, only management ineptness, especially since the writing was on the wall about the upcoming ground shift.  Annex Research, for example, predicted such a trend as far back as 1990 - yes, over 11 years ago! (see the Annex Bulletin 90-13, Mar. 30, 1990). 

Why the leaders of these four computer hardware companies chose to bury their heads in the sand, and hope for miracles instead of scanning the industry horizon for new opportunities, is the question the company shareholders should be asking at the next Annual Meeting.  If the management shows up...  J

That is why this writer summed up the HP-Compaq deal as, “two losers don’t make a winner,” playing off the “two wrongs don’t make a right”-saw (the quote was used in the Journal’s Sep. 5 news story “H-P’s Fiorina Takes on Hefty Job in Turning Around Merged Giant” about this deal). 

We also arrived at that conclusion by looking at the two companies’ stock charts in the last 12 months.  They resembled a downhill ski hill.  The day the “megadeal” was announced (Sep. 4) marked the start of a possible ski jump - a free fall through thin air with uncertain landing outcome, we opined.

Best regards,

Bob Djurdjevic, Founder, Truth in Media, Phoenix, Arizona

Also, check out Djurdjevic's WASHINGTON TIMES columns: "Chinese Dragon Wagging Macedonian Tail,"  "An Ugly Double Standard in Kosovo Conflict?", "NATO's Bullyboys", "Kosovo: Why Are We Involved?", and "Ginning Up Another Crisis"

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