Merger of Hewlett-Packard and Compaq
Merger of Hewlett-Packard and Compaq
Mergers, Acquisitions and Restructuring
Introduction Throughout 1999 and 2000 in the midst of an increasingly competitive business environment, Hewlett-Packard’s board of directors and executive management evaluated numerous alternatives for business growth to protected the company’s viability. Although HP’s Imaging and Printing Group (IPG) dominated its market segment, the company did not rank among the top three among competitors in personal computers, servers, storage, or services. HP recognized its need to build strong complementary business lines while maintaining its strength in imaging and printing. For this reason the board of directors evaluated some strategic alternatives aimed at improving the company’s position in enterprise computing and services. In 2000, HP was pursuing a strategy to expand its services business through both organic growth, thanks to increased investment in its services business, and potential acquisitions. In the same year, Compaq directors had grown annoyed with Compaq’s poor performance and were encouraging Compaq’s CEO, Michael Capellas, to explore a potential business combination with another computer company. Capellas subsequently presented to the board the relative SWOT analysis of potential pairings with companies such as Dell, Sun, EMC Corporation, and Hewlett-Packard among others, and according to Capellas, the strengths of a combined HP and Compaq were “intuitively obvious”. “We wanted to be the next IBM,” Capellas said. Discussions of a business combination between Hewlett-Packard and Compaq began in June 2001, during licensing conversations between the two companies concerning HP-UX software. Carly Fiorina, former HP Chairman and CEO, contacted Michael Capellas to discuss Compaq’s interest in licensing. After a period of deliberation, Capellas contacted Fiorina to discuss the potential for a broader strategic relationship based on synergies between the two companies. By June
Mergers, Acquisitions and Restructuring
Introduction Throughout 1999 and 2000 in the midst of an increasingly competitive business environment, Hewlett-Packard’s board of directors and executive management evaluated numerous alternatives for business growth to protected the company’s viability. Although HP’s Imaging and Printing Group (IPG) dominated its market segment, the company did not rank among the top three among competitors in personal computers, servers, storage, or services. HP recognized its need to build strong complementary business lines while maintaining its strength in imaging and printing. For this reason the board of directors evaluated some strategic alternatives aimed at improving the company’s position in enterprise computing and services. In 2000, HP was pursuing a strategy to expand its services business through both organic growth, thanks to increased investment in its services business, and potential acquisitions. In the same year, Compaq directors had grown annoyed with Compaq’s poor performance and were encouraging Compaq’s CEO, Michael Capellas, to explore a potential business combination with another computer company. Capellas subsequently presented to the board the relative SWOT analysis of potential pairings with companies such as Dell, Sun, EMC Corporation, and Hewlett-Packard among others, and according to Capellas, the strengths of a combined HP and Compaq were “intuitively obvious”. “We wanted to be the next IBM,” Capellas said. Discussions of a business combination between Hewlett-Packard and Compaq began in June 2001, during licensing conversations between the two companies concerning HP-UX software. Carly Fiorina, former HP Chairman and CEO, contacted Michael Capellas to discuss Compaq’s interest in licensing. After a period of deliberation, Capellas contacted Fiorina to discuss the potential for a broader strategic relationship based on synergies between the two companies. By June