Unsurprisingly, analysts are predicting the Compaq Computer Corp/Digital Equipment Corp deal is going to increase the competitive pressures on the already squeezed European computer companies, with locals like Siemens Nixdorf Informationssysteme AG and Compagnie des Machines Bull SA feeling the pinch. The acquisition forms a $38bn company which ranks number two worldwide behind only IBM Corp, and which gains leadership in key areas such as personal computers, Windows NT servers and services. So far, companies such as Siemens and Bull have managed to hold on to leadership in their domestic markets, and only come up against serious competition with the big American rivals such as IBM, Hewlett-Packard Co and Compaq outside their home territories. Now, however, analysts believe the combined Compaq/Digital will begin to make inroads into the already stretched market shares of the European vendors, many of whom have lost local business as their customers’ operations expand worldwide. Steve Braizier, a researcher at Dataquest, expects Compaq to make major inroads into the European space, although he admits the merger won’t change the European computer industry landscape overnight. Both Siemens and Bull have seen profitability decline in recent years, hit especially by the economic downturn in Germany and the rest of continental Europe. Siemens chief executive Heinrich Von Pierer says his computer unit wouldn’t be taking any drastic action as a result of the Compaq acquisition, and certainly it is unlikely Compaq/Digital would pose a short term threat in Germany, especially as the merger is likely to take at least a year to bed down. There is little doubt in the longer term, however, that the economic might and breadth of technological and service offerings of the new company must pose a threat to the European niche players.
