Feeds

HP to buy Compaq for Battle of the Bulge

That'll be $25bn to you, madam

  • alert
  • submit to reddit

High performance access to file storage

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

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.