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HP, Compaq merger: Boon for consumers?



(CNN) -- Analysts disagree on whether the proposed merger of computer giants Hewlett-Packard and Compaq may signal benefits for consumers.

As far as retail prices are concerned, the corporate union might "stabilize the prices for a little bit, because it removes a competitor," says Rob Enderle, a research fellow with the Giga Information Group.

But the combination of HP and Compaq -- the second- and third-largest computer makers, respectively, after Dell -- might not slow the slide of sticker prices. That downward drift is a long-term trend, the product of weakened consumer demand.

"Dell is the main driver in the price wars, so the price wars will keep going," says Enderle. "Dell has already said they will continue it."

Other technology market experts say they're not so sure the HP-Compaq union might help consumers.

"There's nothing good here for the consumers," says Martin Reynolds, a research fellow at Gartner Dataquest. "They've eliminated one of two fiercely competitive brands in the market. And what that means generally is higher prices and less choice.

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"I think we need another major player in the market so I'm concerned about the merger," Reynolds says. "They're going to have to reach an accommodation of some sort with the regulators, who aren't going to like it."

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In the opinion of some observers, the combined company -- drawing on discrete talents within the two companies -- could result in a wider range of services and products for consumers.

"They bring different strengths to the table," says Giga's Enderle. "Compaq has done a better job in regard to engineering an entire line. On the other hand, HP has been strong in consumer products."

Differences, similarities

The two companies share some characteristics, which should make the transition easier, according to Ned May, a senior analyst for International Data Corp.

"There are certainly some cultural similarities between the two companies on the IT server front," says May. "They both approach it from the hardware background."

If regulators approve the $25 billion stock deal -- creating the world's largest personal-computer maker with estimated revenues of $87.4 billion -- both business and single customers could benefit, May says. "It gives some critical mass across the board, which helps."

Analysts say the deal could help prompt more price cuts for consumers, and make the personal computer sector even more competitive.

"It's definitely the end of the PC market as an expanding industry," says David Buik of the Cantor Index. "I suspect other companies will be looking at similar mergers."

And some specialists say that even some similarities between HP and Compaq could play out as a plus for consumers.

"People talk about the possible reduction of choice. I don't see it that way," says Roger Kay, director of client computing for International Data Corp.

"They (HP and Compaq) have really similar product lines to begin with." But considering the many other competitors, he says, "there are a lot of choices out there."

-- CNN.com's Richard Stenger contributed to this report.






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