HP recently re-organised its management structure, lumping the company's underperforming PC division in with its successful printer business. Some observers say it could drag down the entire combined division. Will you be able to buy HP PCs -- or maybe even servers -- this time next year?

No market synergyA quick comparison of market shares from 2000 against 2004 makes uncomfortable reading from HP's perspective. Third-quarter figures from IDC in the year 2000 -- the last decent year for the entire IT business -- showed Compaq leading the parade with a 13.1 per cent share, followed by Dell at 11.5 per cent, HP at 7.8 per cent, IBM at 7.4 per cent, and Fujistu Siemens with five per cent.

HP was the hot company back then, growing 46.8 per cent from year to year. Thus, HP and Compaq owned a combined 20.9 per cent of the world market.

Run the tape forward to 2004 (and please run it quickly so no-one has to see 2001-2003 all over again), and you'll find Dell in the worldwide leadership position with 17.9 per cent of the market. HP is in second place with 15.8 per cent, according to IDC. This in a growing market that expanded by almost 15 per cent in 2004. Research from Gartner for 2004 shows a similar pattern, with Dell in first at 16.4 per cent and HP second at 14.6 per cent.

So, in the four-year period, Dell moved from 11.5 to 17.9 per cent of the world market, while HP and Compaq combined dropped from 20.9 to 15.8 per cent. With each tenth of a per cent worth several tens of millions of dollars in revenues, this change is dramatic and stark. HP and Compaq had collectively almost doubled Dell in 2000, yet now sits firmly in second place as a combined entity.

IDC's 2004 figures also show IBM in third at 5.9 per cent, and Fujitsu Siemens and Acer rounding out the top five vendors.

Beneath the numbersThe ongoing concern about HP, of course, centres around the question of whether its controversial merger with Compaq was a good idea.

The merger was a fundamental test of wills between Fiorina's vision of a new HP and an old guard epitomised by dissident shareholder and founding family member Walter Hewlett. Given Fiorina's penchant for sweeping, less-than-technical pronouncements and cultivation of a showbiz-type image for herself and her new company, the merger controversy devolved into some nasty personal attacks from all parties involved.

Lost in this process was whether or not the merger truly did make business sense. Could two goliaths, separated by 2,000 miles between respective headquarters and a similar gulf in corporate culture, combine to be the most powerful player in all of IT?

Compaq had already found little success in a mega-merger of its own, having put DEC out of its misery in the late 90s as a way to move further up the IT food chain in the enterprise computing market. Its take-over by HP represented a second step upwards and eliminated it as a competitor to HP's personal computing business.

Spread too thinly?
Analysing HP is a complex task, and indeed, the question has been asked whether HP is trying to do too much, is spread too thinly. How does a company succeed in enterprise IT, personal computing, peripherals, and new technologies simultaneously? Is it possible to do so? Would it be a good thing for HP to do so?

When one thinks of the resentment against IBM in the 1960s, which led to a protracted federal lawsuit, and against Microsoft in the 1980s and 90s -- which also led to a less protracted lawsuit -- how is it logical to hammer HP for not being dominant in everything it does? Why can the CEO of a company whose profit rose 38 per cent to $3.5 billion in its most recent fiscal year be characterised as "under fire" or "in trouble?"

Marketing moving forwardOne concern expressed by many analysts during the HP/Compaq merger was how Fiorina planned to combine and differentiate HP's product lines, particularly in the PC space. Compaq had wanted to be a big enterprise IT player for many years, since the lunch of its original tower systems in the 1990s. It then acquired Tandem and DEC in short order, striving to respond to opportunities it saw with major business clients.

Compaq built its reputation on being a sort of gold-standard in the personal computing business, from its original portable and desktop computers, which had a faster chip and cooler looks than the IBM PC, through its entire product line as the personal computer market grew. It surely hoped to maintain that standard throughout the enterprise.

HP meanwhile, built a reputation over the decades for top-notch, if not inexpensive, instruments and computing systems. The merger of the two companies thus brought together two of the most highly regarded product lines in the industry.

How was HP going to differentiate them? Would the Compaq brand simply disappear? Would a "Ford/Mercury," "Toyota/Lexus," or GM-style differentiation occur?

Here are key marketing sell points from HP's Web site:

About HP desktop systems: "Versatile technology you need to communicate, create and enjoy more"

About Compaq desktop systems: "Smart, powerful computers delivering the most for your money. Aggressive designs and an attitude to match."

For portable systems, the site states that HP "notebooks help you discover, create and enjoy multimedia experiences at work and play." Compaq notebooks, on the other hand, have "advanced technology and great value to enhance your productivity."

HP's systems are skewed more toward multimedia. And the site shows that the Compaq systems are slightly cheaper. But what is the big difference between HP and Compaq systems? How does one develop fierce brand loyalty (the kind nurtured by the hard-edged Dell marketing machine) with this sort of weak differentiation and weaker marketing copy?

Here's the problem. Today's HP/Compaq line is too similar and marketed nebulously. So constrained, you have to wonder whether it can ever regain the market leadership it possessed before the merger. Should criticism -- if criticism there be -- focus on Fiorina's big adventure in acquiring Compaq, or is it flawed vision since the merger that is solely responsible for criticism currently directed at her?

From the IT manager's point of view, what does it imply in terms of product longevity and stability? It would hardly be surprising if in five years' time we look back on this year as being the one that broke HP's PC division, analogous to IBM's last year now that it's sold off its PC-making arm.

And if that PC-building synergy and shared resource with the server division goes, how much longer is the big iron business for this world?