HP COMPAQ
Case Analysis
Hewlett-Packard-Compaq :The Merger decision
Group no 3
Ninad Nigam
Vivek Sharma
16
31
Abstract Of case
The spirit of Case is primarily based on the issues related with potential acquisition of Compaq by
HP.
Case tells about circumstances of computer hardware industry at 2001,market was highly competitive, frequent and fast product introduction in market ,continuous improvements in product/price characteristics market needs quick customization in products and service offerings to being profitable. Through differentiation and cost leadership strategy how IBM and Dell not only survived but earned a huge profit
Compaq had net loss of 2.7 bn in year 1998-99 due to acquisition of digital equipment corporation; write off of purchased in process R&D and merger integration expenses. In 2001 due to global economic slow down price war in lower end of computer and server market Compaq's revenue fell
21% and had net loss of 785 mn.
In 1989-99 Hp too faced decline in operating and net earning from 11% to 6% HP had negative growth rate in all business except printer and imaging business. New CEO carly fiorina had taken some strategic steps, revamp the HP way culture, narrowed down the product offering from 83 nos to
17 nos, in order to make it profitable.
In early 2001 due to challenges faced by HP CEO fiorina had taken decision of acquisition of
Compaq. alter hewletts and other founder board member of HP was strongly opposed theat merger.
Both had their own reasons to support the merger.
Financial intermediaries and analysts had their own view of conflicts about the proposed merger decisions. The merger decision had only 51.4% of votes of BOD members. Rest 49.6 % were against the decision. Industry Background
•
In late 99 -2000 and early 2001 computer hardware and service industry was facing a tough price war among all big computer industry like IBM,DELL,COMPAQ and HP
•
Bursting dot.com bubble,9/11 US attack incidence ,quick
Hewlett-Packard-Compaq :The Merger decision
Group no 3
Ninad Nigam
Vivek Sharma
16
31
Abstract Of case
The spirit of Case is primarily based on the issues related with potential acquisition of Compaq by
HP.
Case tells about circumstances of computer hardware industry at 2001,market was highly competitive, frequent and fast product introduction in market ,continuous improvements in product/price characteristics market needs quick customization in products and service offerings to being profitable. Through differentiation and cost leadership strategy how IBM and Dell not only survived but earned a huge profit
Compaq had net loss of 2.7 bn in year 1998-99 due to acquisition of digital equipment corporation; write off of purchased in process R&D and merger integration expenses. In 2001 due to global economic slow down price war in lower end of computer and server market Compaq's revenue fell
21% and had net loss of 785 mn.
In 1989-99 Hp too faced decline in operating and net earning from 11% to 6% HP had negative growth rate in all business except printer and imaging business. New CEO carly fiorina had taken some strategic steps, revamp the HP way culture, narrowed down the product offering from 83 nos to
17 nos, in order to make it profitable.
In early 2001 due to challenges faced by HP CEO fiorina had taken decision of acquisition of
Compaq. alter hewletts and other founder board member of HP was strongly opposed theat merger.
Both had their own reasons to support the merger.
Financial intermediaries and analysts had their own view of conflicts about the proposed merger decisions. The merger decision had only 51.4% of votes of BOD members. Rest 49.6 % were against the decision. Industry Background
•
In late 99 -2000 and early 2001 computer hardware and service industry was facing a tough price war among all big computer industry like IBM,DELL,COMPAQ and HP
•
Bursting dot.com bubble,9/11 US attack incidence ,quick