HAWLETTE

PACKARDS
MERCED DECISION
Submission by Group Mustang

Rishabh Pandey (2015PGP035)

Sunil Gautam Panda
(2015PGP051)
Walkoli Kunal Digambar
(2015PGP055)
Sweta Saroj (2014PGP137)
Ashutosh Belulkar (2015PGP071)

Question: If you are the CEO of HP, will you let ESG develop the Merced chip? Why/why
not?
Problem statement
HP is having good expertise in RISC architecture and is trusted player in high end
commercial computing market. However competitors like SUN are rapidly gaining market
share through aggressive campaigning. With low cost RISC based technologies being
developed by ARM rapidly improving, it has become a strategic decision for HP whether it
should continue outsourcing these processors or invest resources to manufacture its own
ARM like processors. With competitors catching up and disappointment from Wall Street, it
has to act fast, and has to decide on Merced processor launch coming in 6 months. Already
delayed, this new architecture of microprocessor is promising on various fronts, however this
is one time chance with limited resources the decision has to be right.
Answer
Yes, from our analysis we think that we should let ESG develop the Merced Chip.
Explanation
According to our analysis Critical Performance Criteria for ESG is processing speed. If we
refer to Exhibit 5 of the case we would realize that IA-64 Merced has already disrupted the
Enterprise Computing market. As initially it under performed and gradually the supply curve
of IA-64 meets the demand curve of Enterprise Computing. Theoretically, HP should not
change the technology because then it would come to down market. But, the case also
mentions that the RISC technology has reached to its performance limit. With this factor
coming into picture they must move to second technology IA-64 Merced chip

Technology

Limit

First Technology: RISC

Second Technology: IA-64
Merced

With IA-64 Merced chip HP is planning to attack the high end of the computer industry. It is
much more advanced than the INTEL 8086 architecture and HP-PA architecture. Further this
technology would maintain backward compatibility with the windows environment.
Therefore Merced would act as a combination of both RISC and CISC technologies. Hence it
is a logical step for HP to go forward and invest resources in the IA-64 processor launch as it
will help in capturing both RISC based high performance computing market and booming
WINTEL market.
According to 2*2 matrix of technological disruption we can see that HP is having poor
organisational processes in the context of IA-64 processors. Hence the launch of Merced is
delayed. As IA-64 promises to be more advanced than both INTEL 8086 and HP-PA
Architecture. In the case of organisation values HP already has good structure. They already
have good resources and capable workforce in the RISC based computing platform. They are
having a good market share at present and them looking to increase their revenues in the near
future.
Hence according to the 2*2 matrix they should utilize resources for launching and marketing
IA-64 based Merced microprocessor. As they are looking for a breakthrough in their
organization for strengthening their position in the market with competitors like Sun
aggressively trying to capture UNIX & RISC based high end computing market. They should
use their heavyweight team for the production of Merced.