Hp & Compaq M&a Deal

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Section I: The crisis: what is the nature and origin of the trouble? HP at 2001 was strong on the consumer side but didn't have an adequate presence on the corporate side. So when Carly Fiorina came in she focused on why some areas weren't growing. Fiorina has said that the company need to be more results-oriented than it had been before and be able to move faster to meet new challenges. She approached Capellas, CEO of Compaq, about a licensing deal, he suggested a broader relationship between HP and Compaq. Figure1: Historical Prices of the Dell, HP, and IBM. Compaq before merger - Founded in 1982 - #2 in PC market - Business Divisions: o Commercial and consumer PCs o Enterprise computing: servers and storage products o Global services - Continuous weakening performance - Missed an opportunity to retail online and tried to compensate the mistake with made to order system in retail outlets, though with failure - Was caught in vicious cycle of cost cutting and layoffs - Series of bad investments Digital Equipment (AltaVista) - Dell had overtaken Compaq as the PC market share leader in the fourth quarter of 2001, according to market research firm IDC (see Figure1). Hewlett Packard - Founded in 1938 - HP imaging and printing group was the leader in its group - #13 in a Fortune 500 list Issues in HP 1. Was not innovative in its offerings 2. Margins were going down 3. The complementary business was not developed 4. Increase in competition from Lexmark and Epson Pre merger statistics: In 2001 overall not only HP, but the whole industry stumbled, the growth rate decreased drastically, as the result HP cut jobs. HP stock was pluming due to the “.com” bubble as well as due to the lack of direction into the future. Turning the company around required more than just strategy from within. The merger was seen as enabler: 1. HP as a

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