HWP-CPQ. Well they do say multi-billion $$ cost savings. Isn't that a big positive?
"HP and Compaq today announced plans to merge, forming the world's largest PC maker, which would comprise four units so big that each would be among the biggest IT companies in the business.
If consummated, the merger would result in 15,000 lost jobs in the first year or two after the deal's completion, the companies said today. But it would also result in huge cost-savings - up to $2 billion in the first year is being targeted.
However, first the marriage must clear antitrust reviews that are likely in the coming months. Already today, the European Commission said it planned to investigate the merger.
Wall Street did not react with enthusiasm, as HP shares today closed down 18.6 percent at $18.89, their lowest point since 1995. Compaq was down nearly 10.7 percent to close at $10.81, the lowest level since 1996. HP trading volume was more than 5 times greater than normal and Compaq's volume was 8 times the usual level.
Officials said the new company would be divided into 4 separate parts - imaging and printing, access devices, IT Infrastructure and services.
"Each of these 4 units would be a top-10 IT company in its own right," HP Chairman Fiorina said in a conference call with analysts today. Under terms of the merger, Fiorina would be chairman and CEO, and Compaq chief Michael Capellas would serve as president.
"I think Michael and I will build a great partnership," she said. The merger is the "next logical step" in the organizational structures that both companies had in place, Fiorina said. The idea first came up in early 2000 when Fiorina and Capellas were discussing possible licensing agreements, and it began to gather steam about a year ago.
"The further we went, the more sense it made, the more planning we did the more confidence we gained," Fiorina told reporters. "(We knew) that 'Yeah, this is a big damn deal but we can pull this off.'"
Fiorina and Capellas both said they decided to pursue a merger because it makes good business sense, not because the economy has turned sour.
"Absolutely, this makes strategic sense," Capellas said. "But you've got to admit that it's easier to do when times are tough because you have impetus, you have drive and it gets you there."
HP has turned toward outsourcing of manufacturing and Compaq has done more on direct model capabilities, a formula for a marriage made in heaven. "We have capacity to drive more direct volume where we need it for major accounts," said Capellas, "and we'll be able to leverage the capability we have."
Details of the agreement call for Compaq shareholders to get .6325 of a newly issued HP share for each of their shares. The new company would be called HP. It would be based in Palo Alto, Calif., with engineering and product development centered in Compaq's headquarters in Houston, Texas." |
