An $87 billion technology monolith in the making

04 September 2001

In 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.

The two 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.

The deal, 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.

The combined 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.

It is 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.

Carleton 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.