H-P, Compaq Stagger Arm in Arm Into the PC Era's Twilight

For some, the news of Hewlett-Packard's (HWP Quote) deal to acquire Compaq (CPQ Quote) is a flashback to the Arlo Guthrie song Alice's Restaurant.

You'll remember that in Guthrie's musical tale, he gets into trouble when he and a friend, trying to dispose of a half a ton of garbage, spot another pile of garbage at the bottom of a cliff off the side of a side road. "And we decided," says Guthrie, "that one big pile is better than two little piles."

That's not to say that two companies with a combined $87 billion in revenues are no more than trash in the back of a red VW microbus. Rather, the point is that to outsiders, the problems faced by the two companies don't seem to be addressed by lumping them together.

As Nick Moore, portfolio manager at Jurika & Voyles succinctly put it, "It's hard to imagine what scale economies $90 billion has that $40 billion didn't." ...