HP-Compaq <CPQ.N> merger boosts Asian techs , ( trade the flow )
SINGAPORE, Sept 4 (Reuters) - Computer giant
Hewlett-Packard Co's <HWP.N> $25-billion takeover of rival
Compaq Computer Corp spurred shares of Asian high-tech parts
suppliers and component makers on Tuesday as investors hoped
for a business boost.
The news also ignited a run-up in shares of India's Digital
GlobalSoft <DIGI.BO>, 51 percent owned by Compaq. Its stock
jumped 5.5 percent in a weak market on hopes the move would
trigger the public offer provisions of local takeover laws.
Indian takeover laws require an investor who holds 15
percent of the equity of a company to make an open offer to
shareholders to buy a minimum of additional stake of 20
percent.
In Japan, Canon Inc <7751.T>, which supplies laser printers
to Hewlett-Packard, saw its stock rocket nearly 11 percent to
3,750 yen, on expectations the combined company would increase
purchases for its server business.
The new company formed by HP and Compaq will have revenues
of $87.4 billion, rivaling industry-leader IBM <IBM.N>.
It would create a more formidable competitor for Sun
Microsystems <SUNW.O> in the server market, besides being a
bigger player in the PC market versus rivals such as Dell
Computer Corp <DELL.O> and Gateway Inc <GTW.N>.
LIMIT UP IN TAIWAN
Taiwan's computer makers Compal Electronics <2324.TW>,
Asustek Computer <2357.TW>, Quanta Computer <2382.TW> all hit
the daily maximum seven percent. All three have supply links to
either of the U.S. companies.
Compal and Quanta both supply notebook computers to the
U.S. companies, and Asustek sells motherboards to
Hewlett-Packard.
Singapore's largest electronics contract manufacturer
Venture Manufacturing Ltd <VENM.SI>, which makes printers for
HP, saw its shares jump 3.5 percent to S$11.80 at 0648 GMT on
the view the merger would help HP's printer products.
"There is some market speculation that HP printers may gain
more market share and that will boost Venture's sales," said
Samuel Wong, institutional dealing manager at Daiwa Securities.
HP, which accounts for about 25 percent of Venture's
revenues, said recently it planned to slash its suppliers to
four from 20.
TRIGEM SURGES 15 PCT
Trigem Computer, one of South Korea's largest computer
makers, reacted by soaring the limit-up 15 percent to 4,685 won
on expectations of increased exports to Hewlett-Packard.
Its supply to Hewlett-Packard accounted for about 55
percent of total exports in the first half of this year,
analysts said.
"Along with an expected increase in exports, the belief
that demand for computers will increase in the fourth quarter
boosted the shares," said Park Kang-ho, computer analyst at LG
Investment & Securities.
Compaq-linked companies should also benefit, analysts said.
"It will result in a bigger pie for the company's (Digital
Globalsoft) exports and the company will have a bigger parent,"
said Dipankar Choudhury, software analyst at ICICI Securities
and Finance Company Ltd, referring to Compaq's Indian unit.
Digital sourced 85 percent of its revenues from Compaq in
the April-June quarter.
ASIAN PC SHARES GAIN
The news was also well received by Asian rivals of Compaq
and Hewlett-Packard.
Japan's Toshiba Corp <6502.T> firmed 3.95 percent to 605
yen, on the view the merger would dilute the intense rivalry in
the sector and some analysts said it may allow Toshiba, which
makes PCs and chips, to gain market share.
"Any reduction in competition (for Toshiba) is welcome,"
said Scott Foster, analyst at Lehman Brothers.
Among other Asian PC makers, Acer Inc <2306.TW> of Taiwan
closed up T$0.50 to T$15.60. Legend Holdings Ltd <0992.HK>,
China's biggest PC maker, was up 2.1 percent to HK$3.65 at 0649
GMT.
U.S. TECHS SEEN LIFTED
The PC merger may bode well for Wall Street's tech stocks.
September Nasdaq 100 stock futures <0#ND:> were up 7.5
points at 1,480 by 0515 GMT after hovering in negative
territory before the news, which came in early afternoon Asian
trade.
Hewlett-Packard shares were offer-only at $23.20 while
Compaq stock was bid-only at $12.35 on the Instinet electronic
trading system in late Asian trading.
The U.S. markets were closed on Monday for the Labor Day
holiday. On Friday, HP finished the regular session down 19
cents at $23.21 while Compaq fell 34 cents to $12.35.
The merger is expected to generate cost savings of $2.5
billion by the middle of fiscal 2004, the companies said.
Under the terms of the merger, Compaq shareholders will
receive 0.6325 shares of HP for each share owned. That values
Houston-based Compaq at $14.68 a share, a premium of nearly 19
percent to its closing price of $12.35 on Friday.
((--Christina Pantin, Asiadesk, 65-870-3835, with
contributions from Jennifer Tan in Singapore, Nathan Layne in
Tokyo, Song Jung-a in Seoul, Umesh Desai in Bombay, Kirby Chien
in Taipei))
REUTERS
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