The September 4-announced merger of Hewlett-Packard Co (H-P) and Compaq Computer Corp is expected to dramatically alter the tech industry landscape and roil the advertising waters. All because of the stakes involved.
According to Interbrand, a corporate and brand-identity unit of Omnicom Group, Compaq is the 24th-most-valuable brand in the world, valued at $12.35 billion. H-P, which is ranked 15th, is valued at $17.98 billion. Carleton "Carly" Fiorina, H-P's chairman and chief executive, says the combined H-P will spend as much on advertising as H-P and Compaq had spent independently.
To put things into perspective, last year alone, H-P invested $160.9 million in advertising its brand and products, according to CMR, a New York research company owned by Taylor Nelson Sofres. Compaq's ad outlays were $149 million.
Against this scenario, the merger of Hewlett-Packard (HP) India and Compaq's India operations assumes importance not only because it will result in a Rs 3,500-crore computing megacorp that will enjoy a combined share of about 17 per cent in Indian personal computer market. The bigger issue - which emerged a day after the merger was announced - is that Hewlett-Packard plans to largely phase out the Compaq Computer name in favour of its own moniker.
If and when the two merge in India - and estimates of the timeframe for the India merger vary between three to six months - and if the Compaq brand name is jettisoned, it is likely to set in motion the third round of a merry-go-round that started in the early nineties. But first, the current scenario.
FCB-Ulka handles the close-to-Rs 20-crore Compaq account out of its Delhi and Mumbai offices. On the other hand, the Rs 30-crore HP account in India is handled by DDB associate Mudra Communications since October last year. Internationally, however, the HP account is aligned with four agencies, with Publicis handling the brand in most of the bigger markets, including the US and the UK. Time and again, Publicis India has indicated that it is 'ready' to take on the account as soon as the H-P bosses at the Houston headquarters give the green signal. But that hasn't happened yet.
Now the background.
Back in 1993, Mudra had the coveted IBM account in its kitty. However, global realignment took the brand to O&M's doorstep. At that time, O&M was handling the HCL account, which it had to resign in favour of IBM. Mudra promptly pitched for and got the HCL account. In 1998-99, when the Compaq worldwide realignment occurred in favour of DDB, Compaq fell into Mudra's lap. Mudra resigned the smaller HCL account, which moved to Contract.
However, in mid-2000, global realignment once again upset Mudra's applecart. Compaq, which became an FCB client worldwide, decided to move to FCB-Ulka. In India, FCB-Ulka was handling large parts of the HP account, which it was forced to resign. With the HP account open for review, Mudra walked in successfully.
Interestingly, globally, the HP account is split between Bates (seven countries, according to adage.com database), McCann-Erickson (17 countries) Publicis (38 countries) and Saatchi & Saatchi (again 38 countries). "In this scenario, the agency that has to worry the most is FCB-Ulka," says Samit Sinha, managing partner, Alchemist Brand Consulting.
However, it seems early days yet to talk about how events are going to unfold in India. As Sanjeev Bhargava, vice-president, FCB-Ulka says, "It all depends on how soon the integration process is rolled out globally." Adds Arvind Wable, executive director, FCB-Ulka, "H-P has also said they would retain some of the Compaq sub-brands. (These may include the Compaq Proliant server and the Presario notebook.) Which means we could still be handling some part of the Compaq business in the future."
As it seems now, one would have to wait for a few months more for the maze to clear up.
© 2001 agencyfaqs!