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HP to Take Control of Procurement From Compaq in Taiwan
The procurement office of Hewlett-Packard has already approached Arima Computer and Inventec Corporation in an attempt to play a dominant role in procurement from these OEM suppliers, which currently supply to Compaq.
Industry observers are now paying close attention to Inventec and Arima to see if they will take orders from a second OEM customer. In the past their production capacity was totally reserved for Compaq.
Industry sources had said that Inventec was a victim of the acquisition deal. Because of slowed sales of Compaq's products, Inventec's revenue dropped by 25 per cent to NT$34 billion. Because Compaq no longer exists after the HP acquisition and procurement control was expected to be released to HP, Inventec's stock dropped to a new low of NT$18.9 on Thursday.
Unlike other OEM makers such as Quanta Computer Inc and Compal Electronics, Inventec maintained a very close relationship with Compaq. Inventec not only provided notebook PCs to Compaq; it is also the sole OEM maker of Compaq's server product lines. Quanta and Compal have been supplying to both HP and Compaq for a long time. Inventec seems to be a "never, never land" to HP.
Compaq is the largest foreign company to procure its products from Taiwan. Its procurement value will exceed US$10 billion this year, up from last year's US$9.7 billion. HP this year will purchase US$5.5 billion from Taiwan.
Ever since news of the HP acquisition reached Taiwan, stocks of those companies closely associated with Compaq have plummeted heavily. Employees of both Compaq and HP are worried about possible layoffs to be carried out after the acquisition, even though top Compaq Taiwan officials assured that the OEM supply relationship of Inventec, Arima, and Compal will remain the same.
Industry sources said that the top officials of both HP and Compaq were asked to keep silent in response to questions of outsiders as details of the merger are still to be straightened out on the two companies' home turf.
Carleton Fiorina, the chief executive of HP, and the top executive of HP Taiwan were said to have sent e-mails to its customers, sales channels, and suppliers to reiterate that the company's emphasis on customer satisfaction would remain unchanged after the acquisition.
Despite Fiorina's statement that the acquisition would create shareholders' value and an advantageous growth opportunity, her talks were greeted with plummeting stock prices of both companies in the last few days. The combined value of the two companies declined from US$25 billion when the acquisition was first announced to less than US$20.
Industry insiders warned that before the new HP takes measures to cut overseas employees, an army of current Compaq employees may defect to their competitors' camps.
Many foreign fund managers regarded the acquisition deal as a failure.
Fiorina, however, expected the new HP would grow at the industry's norm of 10 per cent or more in sales.
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