a deal that will most definitely change the competitive
landscape in the information technology sector, two global
technology majors have agreed to combine forces to create
an IT behemoth that is likely to have combined revenues
of $87 billion.
companies involved in this momentous decision are Hewlett Packard
(HP), a leading global provider of computing and imaging solutions
and services, and Compaq Computer, a leading global provider of
enterprise technology and solutions. While HP is focused on making
technology and its benefits to all, Compaq is involved in
designing, developing, manufacturing and marketing hardware,
software and solutions and services.
estimated to be around $25 billion in an all-stock deal, is a shot
in the arm for both companies, which have recently seen revenue
slide and profit plunge because of a industry slowdown. Both
companies have announced large job cuts in the recent past.
entity, which will retain the Hewlett Packard name, will see
Compaq merge its operations into HP. The
merged entity will be headquartered in Palo Alto, where HP is
headquartered, and retain a significant presence in Houston, the
home of Compaq. Houston will be a key strategic center of
engineering excellence and product development. The
existing HP shareowners will own approximately 64 per cent
and Compaq shareowners 36 per cent of the merged company. The
deal, which is expected to be completed by the first half of next
year, could raise antitrust concerns.
expected that the
new HP will offer the industry''s most complete set of IT products
and services for both businesses and consumers, with a commitment
to serving customers with open systems and architectures. Further,
senior officials of both companies believe that the combined
company will have number one worldwide revenue positions in
servers, access devices (PCs and hand-helds) and imaging and
printing, as well as leading revenue positions in IT services,
storage and management software segments.
Fiorina, chairman and chief executive officer of HP, will be
chairman and chief executive of the new HP. Michael Capellas,
chairman and chief executive officer of Compaq, will be the
president of the new company. Four other board members from Compaq
will join Mr. Capellas in the new HP.
on the development, Mr. Capellas said that in sharp contrast to
the companys competitors, the new HP is committed to leading
the industry to open, market-unifying architectures and
interoperability. This, he believes, will reduce complexity and
cost for customers and will significantly change the basis of
competition in the industry.
It is the
last that the industry is closely watching. The new HP will pose a
serious challenge to IBM, the worlds largest computer company
and also other players like Sun Microsystems, in the server
segment and Dell Computer in the personal computer segment.
The new HP
will be structured around four operating units that build on the
companies'' similar go-to-market and product development structures
to provide clear customer and competitive focus. Leadership and
estimated revenues (calculated by combining the two companies''
trailing four reported fiscal quarters) are as follows:
- A $20 billion
Imaging and Printing franchise to be led by Vyomesh Joshi,
currently president, Imaging and Printing Systems, of HP.
$29 billion Access Devices business to be led by Duane
Zitzner, currently president, Computing Systems, of HP.
$23 billion IT Infrastructure business, encompassing
servers, storage and software, to be led by Peter
Blackmore, currently executive vice president, Sales and
Services, of Compaq.
$15 billion Services business with approximately 65,000
employees in consulting, support and outsourcing to be led
by Ann Livermore, currently president, HP Services.
Wayman, the current chief financial officer of HP, will be the CFO
of the new entity. To oversee the smooth integration of the two
companies an integration team under the leadership of Webb
McKinney, currently president of HP''s Business Customer
Organization and Jeff Clarke, chief financial officer of Compaq,
has been formed.
Fiorina acknowledged that the integration process would be very
challenging despite the comprehensive integration planning,
industry observers believe that the complexities of the
integration of two of the worlds largest computer companies
might also create a hiatus that could benefit competitors.
Sachs advised HP on the deal, while Compaq was represented by
Salomon Smith Barney.