Synergy makes a new claim on HP’s future

Xerox has been trying to buy HP, Inc. since November. This HP entity is the one which does not make or support any servers used to run OpenVMS. HP split into a pair of companies in 2015, creating Hewlett Packard Enterprise before it halted further development of OpenVMS.

What’s happening to HP Inc., though, has been a part of the OpenVMS history. An outside company bought Compaq in 2002, after Compaq bought Digital several years earlier. In effect, OpenVMS was purchased by a competitor: Hewlett-Packard.

The years that followed the acquisition can be characterized as good for OpenVMS. A new hardware platform was delivered to the OpenVMS community. A well-engineered system, Alpha, was retired. One in, one out. A blow to Tru64 arrived with the departure of Alpha. Compaq was going to have a hard time selling AlphaServers to a world running Intel and AMD chips. The Alpha processing has been moved to emulation now, so there was value there which HP didn’t see.

One item that tipped the HP board and shareholders into the “yes” bucket on the buyout was synergies. Compaq was in the same business and the same markets, in particular with its ProLiant servers. The executives and programs that were running at Compaq were a good match for HP’s aspirations.

The synergy was so complete that after the buyout of Compaq, customers talked a a Red and a Blue HP. The Red was the meat-eater mindset of Compaq, where day to day competition with the likes of Dell honed the Compaq appetite for conquests. The Blue was the HP of the HP Way, with few layoffs and a collegial culture.

In time, the companies formed a Purple HP. Overlaps were trimmed away, though. HP 3000 MPE/iX users fell away. There was apparently no synergy between OpenVMS business servers and the 3000 operations. It doesn’t help when you’re the smaller entity during a buyout.

Xerox is much smaller than HP Inc. Nevertheless, Xerox is offering $24 a share and offering a full slate of directors for the upcoming vote at the HP Inc. shareholder meeting this spring. HP is feeling the heat. Rather than dismissing the Xerox buyout, it now says there are perfect conditions for triggering that synergy.

HP’s CEO Enrique Lores says HP is “reaching out to Xerox to explore if there is a combination that creates value for HP shareholders that is additive to HP’s strategic and financial plan.” Lores says discussions with Xerox have started.

Like every synergy buyout, the companies must reduce costs and invest in areas to grow in order to find a match. Just two weeks ago, the HP board said Xerox “meaningfully undervalues HP, creates significant risk and compromises the future of our company.”

HP Inc. needs changes in a value exchange, which is code for how the synergy would improve HP’s value. HP wants a better capitalization for the purchase. Finally there are the synergy possibilities; HP says they’re overstated. With all that said, HP will talk to see “if there is a combination that creates value for HP shareholders that is additive to HP’s strategic and financial plan.”

Customers who own HP Inc. products aren’t going to be polled. Not any more than the OpenVMS customers were consulted when Compaq allowed itself to get bought. There was that red, blue, and purple synergy, though.

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