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Merge champion (Fiorina)
Initiated September 2001
US $25 billion all stock purchase
Biggest merger in IT history
INTRODUCTION
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Corporate Owl: (HP + Compaq), Mayank & Astha
CEO of Hewlett Packard :
Carly Fiorina
CEO of Compaq :
Mike Capellas
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Corporate Owl: (HP + Compaq), Mayank & Astha
Founded : January 1, 1939
Headquarters : Palo Alto, California, United States of America
Founders ; William Hewlett and David Packard
Originated in Garage
Designed the first Personal Computer
Developing and Manufacturing
a. Computing
b. Data Storage
c. Networking hardware
d. Designing software and delivering services
HEWLETT PACKARD (HP)
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Corporate Owl: (HP + Compaq), Mayank & Astha
Founded1982
Headquarter Harris
Country, Texas, United States
Founders Jim
Harris & Bill
Murto
Introduced
Desk pro 286/386
based systems
The largest supplier of PC systems during the
1990s
1997Tandem
Acquisition
1998
DEC Acquisition
Overtaken by DELL in 2011
COMPAQ
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Corporate Owl: (HP + Compaq), Mayank & Astha
Compaq was acquired for US $25 billion by HP in 2002
PRICING
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Corporate Owl: (HP + Compaq), Mayank & Astha
HP and Compaq suffer similar risks of ‘Standing Still’
Increase competition with major competitors like IBM, DELL
Cut costs by $3 billion annually within 3 years and increase earnings
for shareholders
Merger will enhance business segments as individual and
complimentary each other like supply chain
Face the challenge of a shrinking market
WHY MERGER
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Corporate Owl: (HP + Compaq), Mayank & Astha
IMPACTS OF MERGER ?
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Improved economics and innovations
Complementary leadership in key markets
Strengthened business provides critical mass in key growth market
Financial Benefits
HP’s Business Portfolio will be worse
The Integration Risk of the Proposed Merger is substantial
Negative Financial Impact on HP stockholders
HP’s Strategic Position will not materially improve
PO
SIT
IVE
NEG
ATIV
E
Corporate Owl: (HP + Compaq), Mayank & Astha
HP
PRE-MERGER
Experienced revenue growth but share price
still declined
Faced recession in 2001
Pay cuts and layoffs
Stock price continued to fall
Began to consider acquisitions
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Corporate Owl: (HP + Compaq), Mayank & Astha
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• Dell increases pressure in the low-end server market
• IBM, Dell and new entrants erode more market share
• Merger could improve economics and innovation
• Economies of scale
• Strengthen leadership in storage
• Market growth in IT services
• Developing a direct distribution model
• Consulting and outsourcing (low market share)
• Compaq-Printers (low market share)
• Compaq-Server category and overall storage
• HP-High-end storage
• Strong brand recognition
StrengthsWeak-nesses
ThreatsOpportu-
nities
Corporate Owl: (HP + Compaq), Mayank & Astha
STAKEHOLDERS ANALYSIS
Focus on the primary stakeholders:
Competitors
Public
Customers
Shareholders
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Competitors:
IBM, Sun, Dell
Cost savings by HP
Public and Customers:
Allows HP to reach more people
Adds Compaq’s stable of customers
Tap into Compaq’s positive image
Could potentially entice new
investors
Corporate Owl: (HP + Compaq), Mayank & Astha
MANAGEMENT’S REASONS FOR MERGER
Improved Economics and Innovation
Complementary Leadership in Key
Markets
Strengthened Business Provides Critical Mass in Key Growth Market
Financial Benefits
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Corporate Owl: (HP + Compaq), Mayank & Astha
1. HP’s Business Portfolio Will Be Worse
Increased exposure in unprofitable PC business
Imaging and printing segment was expected to grow over 10% per
year
PC market was expected to shrink
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Corporate Owl: (HP + Compaq), Mayank & Astha
2. The Integration Risk of the Proposed
Merger is Substantial
No significant merger involving computer companies had ever
met expectations
HP management had no experience with a merger this large
Analysts estimated revenue losses could be as high as 15-17%
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Corporate Owl: (HP + Compaq), Mayank & Astha
3. Negative Financial Impact on HP
Stockholders
Dramatic drop in stock price after proposed merger was announced
Wall Street predicted low estimates for future financial performance
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Corporate Owl: (HP + Compaq), Mayank & Astha
4. HP’s Strategic Position Will Not
Materially Improve
Neither company had a profitable PC business model
Neither company had successfully transitioned to a direct
distribution model
Merger would not materially improve HP’s market position
in high-profit areas
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Corporate Owl: (HP + Compaq), Mayank & Astha
SO, WHAT HAPPENED?
51.4% shareholder approval margin
Showed a high level of uncertainty
Supporters felt it was the best option available
for the two firms
Critics against the merger voiced opinions
about the future strategy and the riskiness of
large mergers
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Corporate Owl: (HP + Compaq), Mayank & Astha
Total Revenue : US $111.454 billion (2014)
Net Income : US $ 5.013 billion (2014)
CEO : Meg Whitman
HP TODAY…
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Corporate Owl: (HP + Compaq), Mayank & Astha
Source: IDC Worldwide Quarterly Server Tracker, August 26, 2014.
HP server revenue grew for the third time in four quarters.
HP has held the number one server market share position for four quarters.
In the June quarter it generated $3.2 billion in revenue for a 25.4% share and 4% revenue growth(September 2, 2014)
HP MARKET SHARE
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Corporate Owl: (HP + Compaq), Mayank & Astha
Technology Solutions Group
Enterprise Storage and Servers (ESS)
HP Services (HPS)
HP Software
Personal Systems Group (PSG)
Imaging and Printing Group (IPG)
HP Financial Services (HPFS)
Corporate Investments
HP STRUCTURE NOW
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Corporate Owl: (HP + Compaq), Mayank & Astha
Consumer trends
Media & entertainment growth
Enterprise trends
Manufacturing “green” servers, acquiring analytics companies, SaaSoptions
Diversify portfolio
Tap into videoconferencing – potential agreements with Tandberg systems
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Corporate Owl: (HP + Compaq), Mayank & Astha
www.cata.ca/files/PDF/Resource.../studies/quebec-HPQ-
merger.pdf
https://business.missouri.edu/ifmprogram/reports/2010FS/HP
%20Report.pdf
www.nasdaq.com › Quotes › HPQ › Analyst Stock
Recommendations
https://en.wikipedia.org/wiki/Compaq
BIBLIOGRAPHY
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Corporate Owl: (HP + Compaq), Mayank & Astha