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Compaq/HP Hairball: Page 3 of 3

“We don’t know whether Mark Lewis, currently the VP and general manager of Compaq’s storage business, will head up the new storage group, or if he will he work for Nora Denzel, VP and general manager of HP’s Network Storage Solutions Organization,” says one confused employee at Compaq’s storage unit. “For what its worth, we think Lewis will go, which is an unsettling thought."

It’s clear that before the new company can assume any advantageous position against its rivals it must first sort out this hairball of integration issues. Fiorina herself conceded on a conference call with analysts that Compaq and HP still have much work to do in services, software, and storage, before the new company can work in real life. And that’s assuming the SEC approves the deal, which may provoke antitrust concerns.

Under the terms of the deal, HP would swap about 0.63 of a share for each share of Compaq. In morning trading Tuesday, shares of Compaq were up 0.40 a share (3.2%) at 12.73, while HP's stock fell 2.15 (9%) to 21.06.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com