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Compaq takes over Digital

When two global information technology (IT) giants, Digital and Compaq, merged in June, the Slovak branches of each company felt the shockwaves of the deal.
Digital Slovakia was renamed Compaq Slovakia, and experienced minor changes in its management structure. And though market players still claim that Slovak customers were more familiar with the Digital brand, Compaq managers are confident that in terms of revenue, the companies will earn more together than the sum produced by their individual parts.
"We are hoping that the acquisition will spur higher revenues than were produced by the formerly independent companies," said Jozef Jurkovič, sales and marketing manager at Compaq Slovakia. "We hope that in this case, one plus one will equal three."

When two global information technology (IT) giants, Digital and Compaq, merged in June, the Slovak branches of each company felt the shockwaves of the deal.

Digital Slovakia was renamed Compaq Slovakia, and experienced minor changes in its management structure. And though market players still claim that Slovak customers were more familiar with the Digital brand, Compaq managers are confident that in terms of revenue, the companies will earn more together than the sum produced by their individual parts.

"We are hoping that the acquisition will spur higher revenues than were produced by the formerly independent companies," said Jozef Jurkovič, sales and marketing manager at Compaq Slovakia. "We hope that in this case, one plus one will equal three."

According to Jurkovič, the acquisition was the largest of its kind to date in the history of the computer industry. The merger was worth $9.6 billion, creating the world's second largest computing firm with an overall turnover exceeding $57 billion in 1997.

"Compaq's aim is to be the leader among corporate computing providers," Jurkovíč maintained, adding that Digital Slovakia had already been the leading provider in the Slovak market before the merger. He said that the new firm has also started to hone in on the personal computer (PC) business.

Jurkovič reported that Compaq Slovakia enjoyed a more than 20% year-on-year increase in overall turnover from January to December 1997, to approximately $19 million. Digital Slovakia, on the other hand, which operates on a different fiscal year, raked in $36 million from July 1997 until the merger in June 1998.

"Thanks to the acquisition of Digital, the position of Compaq in the Slovak market has improved significantly," said Jurkovič. Compared to the other global hardware producers operating in Slovakia, Compaq is the market leader in the sale of Unix-based and Windows NT-based servers, with a market share topping around 50%. "It's almost twice as much as the share of our best competitor" Jurkovič added.

But market players said that Slovak customers had been much more familiar with the Digital brand computers, a fact which might hurt the merged firm. "Digital was very well established on the Slovak market, but not many people knew Compaq," said Viliam Machyňák , deputy marketing director at Gratex International, a Slovak IT distributing firm. "Compaq is trying to make itself visible by lowering its prices so they attract the customers who knew Digital," he added.

Jurkovič agreed that the Slovak market has certain specific features that greatly influence the position of Compaq in the country. "We discovered that the tradition of Digital computers in Slovakia created problems in the beginning when we established Compaq in the market," explained Jurkovič, adding that even before 1989, Digital computer clones had circulated in the former Czechoslovakia and had been used primarily for scientific and statistical purposes.

"On the other hand, the market was familiar with our products, so the point at which we entered the market after November 1989 was better than anywhere else in the world," Jurkovič said.

According to Jurkovič, the Slovak market is relatively small with fewer crucial major customers compared to other central and west European countries. "Therefore, marketing strategies have to be adapted to the relatively limited sales possibilities of the market," he added. The small market, Jurkovič claimed, required that the company focus mainly on those segments of its customer portfolio that secure the company's market leadership.

"Compaq, similar to Digital in the past, thus oriented its sales predominantly towards the areas of utilities, telecommunications, the banking and finance sector and semi-finished manufacturing businesses," he said.

Though the market has tended to be dynamic in the last several years, a slight stagnation set in during 1997 with several customer groups, and in 1998 Compaq even lost some of its market share.

"We are not counting on a similar increase in 1998 [to the 20% jump in 1997], but a, significant increase is still expected" said Jurkovič, adding that this year's difficult situation with the devalued Slovak currency and falling customer purchasing power would have a slightly negative influence on the company profits.

"Nevertheless, with the acquisition of Digital, Compaq did not lose a single business partner - we just gained new ones," Jurkovič said, adding that in acquiring the complete product portfolio of Digital, Compaq would now be able to offer a significantly wider range of products and services.

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