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Hewlett Packard Acquires Compaq Corp. for $25 Billion By Dan Calloway, TheWorldJournal.com 
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On September 4th, Hewlett Packard announced its intent to acquire Compaq Corporation for the all-stock purchase amount of $25 billion. Under this new deal, approved by the boards of both companies, each stockholder of Compaq shares will receive 0.6325 shares of HP stock in addition to their current shares in Compaq Corporation stock. The merger is expected to be final in the first half of 2002 and at that time 64 percent of all stockholders in the newly merged company will be from the original HP stockholders. This deal, when completed, will place HP as one of the largest IT companies ever with projected sales of $87.4 billion and operating revenues of $3.9 billion. In comparison, IBM Corporation reported total sales of $90.1 billion in the last 4 reported quarters. The current chairman and chief executive officer of HP, Carly Florina, will retain her position while Michael Capellas, chairman and chief executive officer of Compaq, will be the new company president. HP and Compaq have not been rival competitors in the past. Both companies compete against companies like Dell Computers for the PC desktop and laptop markets and Palm, Inc. for handheld devices. The newly formed company will have four main divisions: - The Access Devices division will be the largest of the four in revenue terms, based on the last four quarters, with estimated sales of $29 billion. It will be led by Duane Zitzner, currently president of the computing systems division of HP. - The IT Infrastructure division will include the company's servers, storage and software operations and have estimated revenues of $23 billion. Peter Blackmore, currently executive vice president of sales and services at Compaq, will lead the division. - The Imaging and Printing division will be led by Vyomesh Joshi who currently holds the position of president at a similar division at HP. Its estimated revenues will be $20 billion. - The smallest, in revenue terms, of the four divisions will be the Services business. Led by Ann Livermore, who is currently president of HP's services division, it will employ almost half of the combined workforce of the company -- some 65,000 staff. The deal is said to come as the stock prices of both companies are languishing near 12-month lows. Shares in HP closed at $23.21 on August 31st, just above the 52-week low of $23.01 and well off its 52-week high of $62.81 while those of Compaq closed at $12.35 and have traded in a range between $33.37 and $12.27 in the last 12 months. © September 6, 2001 |
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