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Compaq Hp Merger Essay

9818 words - 39 pages

Compaq HP Merger

"There is no more dramatic or controversial activity in corporate
finance than the acquisition of one firm by another or the merger of
two firms. It is the stuff of which reporter's dreams are made, and it
is also an embarrassing source of scandal."(Ross,S.1996)

A merger refers to the absorption of one firm by another. The
acquiring firm retains its name and its identity, and it acquires all
of the assets and liabilities of the acquired firm. After a merger,
the acquired firm ceases to exist as a separate business entity. In
resent years, more and more merger and acquisition happened for those
big companies as a result of intense competition in the business
world. To maintain the competitive position in their respective
industry, merger and acquisition become suitable strategic
alternative, which would bring synergy to both companies. Revenue
enhancement, cost reduction, lower taxes, and lower cost of capital
can be the basic categories of possible sources of synergy.

The merger of Compaq and HP companies is a resent case, which brings
controversial discussion in the public media. When Hewlett-Packard CEO
Carleton S. Fiorina and then-Compaq CEO Michael D. Cpellas met with
investors last fall to sell their controversial merger, many comments
present different opinions on this event. In this case study, it will
focus on the pre-merger of HP and Compaq. By looking insight of the
whole process of the merger, the motivation of the merger will be
identified, as well as its expected synergy resulting from merger.
Important analysis will be of whether the expected effects of the
merger were a reasonable basis for going ahead with it at the time of
the merger and the challenge facing the merger.

Chapter 2 Background of Compaq and HP companies

2.1 Compaq company profile before merger

Compaq Computer Corporation is a company which manufactures, designs
and markets hardware, software, solutions and services for the NonStop
TM Internet world. Compaq provides industry-leading enterprise
computing solutions, networking and communication products,
fault-tolerant business-critical solutions, portable products and
consumer PCs, commercial desktop. Customers of the company include,
home users, business interests, government and educational users. The
products of the company include industry-standard servers,
business-critical servers, storage products, portables, monitors,
desktops, workstations, handhelds, Internet access devices, life-cycle
management products, desktop PCs, printers and related products. The
company operates mainly in Japan, North America, Asia-Pacific, Latin
America, China, Europe, the Middle East and Africa. In fiscal year
2001, Compaq reported revenues of $33.6 billion. Enterprise computing
accounted for 34% of 2000 revenues; consumer pc 18%;...

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