Feeds

HP to buy Compaq for Battle of the Bulge

That'll be $25bn to you, madam

  • alert
  • submit to reddit

Intelligent flash storage arrays

So this was Compaq CEO Michael Capellas' grand plan to transform the company within 180 days: sell it to competitor Hewlett-Packard for $25 billion in shares.

The two companies last night announced a mega-merger in which HP shareholders will have 64 per cent of the combo and Compaq shareholders will take 36 per cent.

HP CEO Carly Fiorina will be top banana for the new entity, assuming CEO and Chairman duties. Compaq CEO Michael Capellas will become president, and he's joined on the new board by four Compaq staffers.

And finally Fiorina gets her Big Deal. Last time she tried was the aborted $18 billion takeover of PWC's consultancy arm. That was a Vision-build-up-the-services-business-Thing. The takeover of Compaq is a chisel- away-at-costs/swamp-the-competition exercise in corporate aggrandisement.

OK so it's been a tough nine months or so for HP and Compaq - profits warnings/redundancies by the thousand - But isn't this a rather expensive way to overtake Dell?

The HP-Compaq combo will be the world's no.1 in all sorts of computer hardware, ranging from printers, PCs, and Unix servers. Combined revenues at $87bn will almost match those of IBM (although the duo has nothing like Big Blue's service revenues).

That's if the two companies retain market share in what will inevitably be a prolonged period of introspection. First the merger will have to get past competition authorities in the US and the EU; second, there will inevitably be thousands of lay-offs - and not just in the assembly plants. Already, $2.5bn worth of post-merger savings - 15,000 jobs - have been identified.

HP and Compaq is out-and-out consolidation-territory, and there will be blood on the floor of the executive suites. (If you are talking synergies,lack of overlap etc. a better combo would be Dell/Sun - and no we are not suggesting that such a thing will happen.)

The last time a computer hardware mega-merger was attempted - when Compaq took over Digital Equipment Corporation - thousands of middle management jobs - went down the Swanee. And who can say that Compaq emerged a stronger or better company for the experience?

Sure it ended up with a service business; it also acquired in Alpha semiconductor technology which it ended up running into the ground. Compaq's share of the hardware market has also eroded gently since the Digital takeover.

And what's the betting that HP and Compaq will together be greater than the sum of their parts? ®

Related Stories

Princess Fiorina kisses the Ugly Frog
HP makes Don Capellas an offer he can't refuse

Top 5 reasons to deploy VMware with Tegile

More from The Register

next story
Scrapping the Human Rights Act: What about privacy and freedom of expression?
Justice minister's attack to destroy ability to challenge state
WHY did Sunday Mirror stoop to slurping selfies for smut sting?
Tabloid splashes, MP resigns - but there's a BIG copyright issue here
Google hits back at 'Dear Rupert' over search dominance claims
Choc Factory sniffs: 'We're not pirate-lovers - also, you publish The Sun'
EU to accuse Ireland of giving Apple an overly peachy tax deal – report
Probe expected to say single-digit rate was unlawful
Inequality increasing? BOLLOCKS! You heard me: 'Screw the 1%'
There's morality and then there's economics ...
Hey Brit taxpayers. You just spent £4m on Central London ‘innovation playground’
Catapult me a Mojito, I feel an Digital Innovation coming on
While you queued for an iPhone 6, Apple's Cook sold shares worth $35m
Right before the stock took a 3.8% dive amid bent and broken mobe drama
EU probes Google’s Android omerta again: Talk now, or else
Spill those Android secrets, or we’ll fine you
prev story

Whitepapers

A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.