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A Project Report Submitted to Utkal University in the Partial Fulfillment of Degree of Master of Finance & Control.
(2009 – 11)
Submitted by Dillip Khuntia
Roll No. – 33706V093011
3370V093021 Roll No. – 3370V093021
Under the Guidance of
Prof. Samson Moharana
Director, MFC, P.G. Department of Commerce Utkal University
MASTER OF FINANCE & CONTROL
P.G. DEPARTMENT OF COMMERCE
UTKAL UNIVERSITY BHUBANESWAR
WE do hereby declare that the project entitled “An Compaq” Analytical Study of Merger: HP and Compaq” is submitted to Utkal University for the partial fulfillment of degree of Control, Master of Finance and Control Utkal University. The project is an authentic piece of work done by us under the guidance of Prof. Samson Moharana, Director, MFC, P.G. Prof. Moharana Department of Commerce, Utkal University and it has neither been neither submitted for award of any other degree to any other University, Academy, Institution nor published in any magazine or anywhere else in part or full to best of our knowledge.
PLACE: BHUBANESWAR DATE:
KHUNTIA) (DILLIP KHUNTIA)
PATTNAIK) (DIANA PATTNAIK)
The satisfaction that accompanies the successful completion of any task would be incomplete without mentioning people who made it possible, whose encouragement and consistent guidance crowned my efforts with success. We would like to express our heartfelt indebtedness and deep sense of gratitude to our faculty guide Prof. Samson Moharana, Director, Control, Master of Finance & Control, for sharing his knowledge and giving us guidance and generous co-operation. We are also thankful to our other faculty members and our friends for their continuous support and encouragement.
PLACE: BHUBANESWAR DATE:
KHUNTIA) (DILLIP KHUNTIA)
PATTNAIK) (DIANA PATTNAIK)
Prof. Prof. Samson Moharana
Director, MFC P.G. Department of Commerce Utkal University
This to certify that the project entitled “An Analytical Compaq” Study of Merger: HP and Compaq” is a record of bonafide research work carried out by Dillip Khuntia and Diana Pattnaik under my supervision and guidance. It embodies result of their original contribution. The project has reached the standard of fulfilling the requirements of the regulation relating to the degree of Master of Finance and Control. No part of this project has been submitted to any other institution for the award of any other degree.
I wish them all success in their future endeavours.
PLACE: BHUBANESWAR DATE:
Moharana) (Prof. Samson Moharana) Prof. P.G. Dept. of Commerce Utkal University.
The world’s largest corporate Information Technology merger began in September 2001 when HP announced that they would acquire Compaq in an all stock purchase valued at $25 billion. Over an 8 month period ending in May 2002, the merger passed shareholder and regulatory approval with the end result being one company. The new HP has annual sales of approximately $90 billion which is comparable to IBM, and an operating income of almost $4 billion. The merger was led by Carly Fiorina, the chairwoman and CEO of HP. The president of the new HP was Michael Capellas who was the former chairman and CEO of the old HP and who has recently resigned and is now the CEO of World Com. Overall, many analysts were critical of the merger from the beginning since both Compaq and HP were struggling companies before the merger. The common question that has been raised by analysts is: Do two struggling companies make a better merged company? Some analysts have indicated that the merger is a gamble and that it is difficult to see any focused logic behind the merge considering that most I.T acquisitions are not successful. Prior to the merger, Compaq has been unable to grow despite previously buying Digital, while HP was trying to grow internally, without much success. Both companies were still adjusting to acquisitions they have made in the past and both were adjusting to new leadership (Fiorina and Capellas). The merger deal also means that there are many overlaps in products, technologies, distribution channels, services, facilities and jobs. Employee morale is a threat to a successful merger as there has been numerous layoffs -15,000 employees. The claimed annual cost savings of about $2.5 billion dollars by the year 2004 amounts to only 3 % of the combined costs of both companies. Gartner Group research has indicated that the merged company has failed to do a good enough job of presenting the benefits of an acquisition of this scale to justify the deal’s risk as it is generally known that technology mergers rarely work. In addition, both companies in the past have struggled to resolve conflicts between direct and indirect sales channels. The cultural background of both companies is quite different and integration will take a long time. The culture at HP is based on consensus; Compaq’s culture on the other hand is based on rapid decision making. From a positive perspective, most botched tech mergers involved companies that were trying to buy their way into new businesses they knew little about, this is not the case with the HP/Compaq merger. Apart from servers and PC’s, they have several areas where their
products overlap. e.g: they are both are involved in making data -storage equipment and both make hand held computing devices. In addition, both companies also bring different strengths to the table. Compaq has done a better job in regard to engineering an entire line and HP has been strong in consumer products. The justification provided by HP senior management suggests that a merger will enable them to compete with two of their biggest competitors, IBM and Dell. In conclusion, it is observed that, the merger initially was opposed by many but with the strong determination of Fiorina it was finalized and this merger may seems that it is a wrong move but the results were favorable. Today HP after merging with Compaq which was one of its the strongest competitor is now leading the industry.
Declaration Acknowledgement Certificate Executive Summery CHAPTER ONE: INTRODUCTION 1.1 Introduction 1.2 Objective 1.3 Research Methodology 1.4 Limitation 1.5Chapterisation CHAPTER TWO: MERGER AND ACQUISITION 2.1Merger and Acquisition 2.2 Rationale of Merger and Acquisition 2.3 Recent Trend in Merger and Acquisition CHAPTER THREE: THE INDUSTRY AND COMPANY PROFILE 3.1 The Industry Profile 3.2 The Indian Scenario 3.3 The Company Profile CHAPTER FOUR: MERGER OF HP AND COMPAQ 4.1 Rationale of Merger 4.2 Target Selection 4.3 Target Valuation 4.4 Due Diligence 18 20 22 26 14 14 15 5 5 9 2 2 2 3 3 i ii iii iv
CHAPTER FIVE: PROBLEMS AND POST-MERGER INTEGRATION 5.1 Problems during Merger 5.2 Post-Merger Integration CHAPTER SIX: EVALUATION OF MERGER 6.1 Does the Merger Make Business Sense 6.2 Does the Merger Make Economic Sense 6.3 Advantage of Merger 6.4 Opposition to the Merger 6.5 HP Today 6.6 Interpretation 6.7 Lesson from the Case 6.8 Conclusion BIBLIOGRAPHY 33 33 33 34 35 37 37 38 39 29 30
1.1 INTRODUCTION From the smallest businesses to the world’s largest corporate titans, the search for synergy often leads people to seek new markets and new partners. The vast majority of these efforts are driven by business factors, but according to numerous experts, they succeed or fail more often because of cultural factors than for any other reason. As a result, the organization that understands its core values is much more likely to reach the kind of growth and success that nearly all businesses seek. Mergers and acquisitions, or “M&A” as they are known in the trade, serve as a prime example of how intangible aspects such as corporate culture can hold sway over billions of dollars and thousands of careers. When done well, they have the potential to grow markets, build on complementary strengths, and eliminate inefficiency. But because they involve human beings, it is impossible to predict their success on a balance sheet solely through tangible factors such as infrastructure, head count, or market share. What ultimately matters in an acquisition is what happens in the hearts and minds of the people who remain with the new organization and what culture these formerly distinct entities choose to build while moving forward. 1.2 OBJECTIVE On the above premise, the following are laid down as the objective of this study I. To study the rationale of mergers. II. To evaluate the merger of HP with Compaq.
1.3 RESEARCH METHODOLOGY The scope this project is confined to the study of the merger of HP with Compaq and evaluation of its success. This also includes the study of the pre-merger and post-merger integration and due diligence involved therein. The various problems faced by both the companies are also taken into preview for this project. The data used in this project is secondary in nature and consist of various articles published in various journals and newspapers, the annual reports of both the entities and data collected from various website in internet. The due diligence of the merger is also taken into consideration for this project. For valuation purpose some of the data are collected from
various sites of the stock exchanges like the web site of Bombay Stock Exchange Limited and National Stock Exchange Limited. 1.4 LIMITATION Some of the limitations that are faced during this study are; 1. The information collected is limited by the authenticity and accuracy of the information as these are mostly collected from secondary source. The data collected from the websites are limited and certain information is not available in the website which is essential for this project. 2. The time of study is very short. 1.5 CHAPTERISATION The project is about the analysis and evaluation of merger between HP and Compaq. The chapters describing various facet of this case are; Chapter one deals with the introduction to the project report, starting with importance, objectives and research methodology adopted. The limitation to the study is also laid down. Chapter two deals with the conceptual study of merger and acquisition. The rationale of merger and acquisition and the recent trend in mergers and acquisition are laid down here. Chapter three deals with the industry profile and company profile of both the companies HP and Compaq. The case is discussed in chapter four, where rationale of merger between HP and Compaq, target selection and valuation is discussed. The next chapter explains the problems during the merger and post merger integration. The ultimate chapter deals with the evaluation of the merger, lesson from the case and conclusion.
Merger & Acquisition
2.1 MERGER AND ACQUISITION In the simplest way, Merger can be defined as how a "Marriage" is whereas an Acquisition can be referred to as an "Adoption" of a child. The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. 2.2 RATIONALE OF MERGER AND ACQUISITION The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial performance. The following motives are considered to improve financial performance: 2.2.1. SYNERGY Synergic effect occurs when two substances or factors combine to produce a greater effect together than the sum of those together operating independently. This theory expects that there is really "something out there which creates the merged entity to maximize the shareholders value". To put in other words, synergy is the ability of a merged company to create more shareholders value than standalone entity. FINANCIAL SYNERGY The resultant feature of corporate merger or acquisition on the cost of capital of the combined or acquiring firm is called as financial synergy. It occurs as a result of the lower cost of internal financing versus external. A combination of firms with different cash flow positions and investment scenario may produce the synergic effect and achieve lower cost of capital. It means when the rate of cash flow of the acquirer firm is greater than that of the acquired firm, there is tendency to relocate the capital to the acquired firm and the investment opportunity of the latter increases. If the cash flows of the two entities are not perfectly correlated, the financial synergy can be expected thus reducing risk. The perceived reduction of the instability of the cash flow, would lead the suppliers to trust the firm, the combined debt capacity of the combined firm may be greater than the individual firms.
OPERATING SYNERGY Economies of scale and economies of scope exist in the industry and before the merger; the activities of the individual firms are insufficient to exploit these. Synergy takes the form of revenue enhancement and cost reduction. Speaking of cutting down costs, this goal is typically achieved through economies of scale, particularly when it comes to sales and marketing, administrative, operating, and/or research and development costs. As for revenue synergies, these are achieved through product crossselling, higher prices due to less competition, or staking a larger market share. The merger of ICICI with ICICI Bank and the reverse merger of IDBI Bank with IDBI served multiple objectives. First, the institutions were strengthened financially. Second, they helped to avoid the complex processes of restructuring the weaker of the units and to foster financial stability. Finally, they have opened the possibilities of actively promoting universal banking. When two companies in the same industry merge, the combined revenue tends to decline to the extent, they overlap with one another and some of the customers may also become alienated. For the merger to benefit the shareholders there must be ample opportunities for the cost reduction, so that the initial lost value is recovered in due course through synergy. 2.2.2. GROWTH Increasing a company's growth is the most common reason behind merger. Growth can be achieved through investing in capital projects internally or externally by buying out the assets of outside companies. Empirical studies show that the faster growth rates are achieved through external growth by means of mergers and acquisitions. In September 2002, Asian Paints India Ltd, announced its decision to acquire 50.1% controlling stake in the Singapore-based Berger International Ltd for a consideration of Rs. 57.6 crore. The primary reason for the merger was to enter into the South-East Asian market that BIL offered. With this acquisition, Asian paints would have a combined capacity of about 100,000 tones and will have 27 manufacturing facilities worldwide.
2.2.3. MARKET POWER One of the main motives of a merger is to increase the share of a firm in the market. It means to increase the size of the firm and also leading to the monopoly power, hence the firm gets an opportunity to set prices at levels that are not sustainable in a more competitive market. There are three sources by which market power can be achieved. They are product differentiation, overcoming entry barriers and improving market share. One important reason that companies combine is to eliminate competition. Acquiring a competitor is an excellent way to improve a firm's position in the marketplace. It reduces competition, and allows the acquiring firm to use the target's resources and expertise. Unfortunately, combining for this purpose is per se illegal under the antitrust acts as a predatory practice in restraint of trade. Consequently, whenever a merger is proposed, a major part of the resulting press release often deals with how this combination of firms is not anti-competitive, and is done to better serve the consumer. Even if the merger is not for the stated purpose of eliminating competition, the regulatory agencies may conclude that a merger is likely to be anti-competitive. For example, Canadian National's attempt to merge with Burlington Northern Santa Fe was blocked because of concerns that the combination would prompt a series of mergers and acquisitions whose net effect would be to leave the continent with only two transcontinental railroads. Although eliminating competition may result in merger and acquisition activity, it is generally not acceptable to state this as the purpose of such activity. Horizontal mergers take place with a motive to attain market power. It is of great concern to the government because it might lead to concentration or monopoly. Hence comparison between their efficiencies versus their effects of increased concentration must be made. Note that horizontal mergers are not the only type of mergers that can yield more market power. Vertical mergers can enable a company to capture sources of supplies, for example, that are of paramount importance to its competitors. This is why industry regulators routinely limit and even disallow horizontal and vertical mergers if there is even a hint of too much market power concentrating in the hands of only a few companies. 2.2.4. CORPORATE TAX SAVINGS Although tax savings may not be a primary motivation for a combination, it can sweeten the deal. When a purchase of either the assets or common stock of a company takes
place, the tender offer less the stock's purchase price represents a gain to the target company's shareholders. Consequently, the target firm's shareholders will usually experience a taxable gain. However, the acquiring company may reap tax savings depending on the market value of the target company's assets when compared to the purchase price. The acquiring company can write up the target company's assets by the amount that the market value exceeds the net book value of the target company's assets. This difference can then be charged off to depreciation with resultant tax savings. This differs from goodwill in that goodwill is never tax deductible. Depending on the method of corporate combination, further tax savings may accrue to the owners of the target company. 2.2.5. MARKET/BUSINESS/PRODUCT LINE ISSUES Often mergers occur simply because one firm is in a market that another wants to enter. All of the target firm's experience and resources (the employees' expertise, business relationships, etc.) are available by buying the targeted firm. This is a very common reason for acquisitions. For example, Monsanto acquired G. D. Searle because Monsanto wanted to acquire the pharmaceuticals and consumer chemicals (Aspartame) businesses. Sentry Insurance acquired John Deere Insurance Group to enter the market for insuring implement dealers, and transportation. CSK Automotive purchased All-Car to have access to the Central Wisconsin automotive parts market. Similarly, Canadian National purchased Wisconsin Central to enter the U. S. rail market. Whether the market is a new product, a business line, or a geographical region, market entry or expansion is a powerful reason for a merger. Closely related to these issues are product line issues. A firm may wish to expand, balance, fill out or diversify its product lines. For example, merger and acquisition activities of Nortek/Peachtree Companies are primarily product line related. 2.2.6. ACQUIRE NEEDED RESOURCES One firm may simply wish to purchase the resources of another firm or to combine the resources of the two firms. These resources may be tangible resources such a plant and equipment, or they may be intangible resources such as trade secrets, patents, copyrights, leases, etc. , or they may be talents of the target company's employees. One reason given for the mergers in the petroleum industry is that companies wish to acquire the leases of their competitors. Both firms and individuals purchase an asset for its utility.
2.2.7. DIVERSIFICATION Diversification is another frequently cited reason for mergers. Actually, it was THE reason during the conglomerate merger wave. The idea was to circumvent regulatory restrictions on horizontal and vertical mergers by going outside a company's industry into new markets and to achieve growth there. International mergers provide diversification both geographically and also by product line. When various economies are not correlated, then the international mergers reduce the earning risk, inherent in being dependent on a single economy. Thus international mergers reduce systematic and unsystematic risk. 2.3 RECENT TREND IN MERGERS AND ACQUISITION 2.3.1 GLOBAL MERGER AND ACQUISITION TRENDS FOR 2006 AND 2007 2007 and 2006 were marked by a spate of mergers and acquisitions all over the globe in both developing and developed countries. The general trend was that, there was a decline in the number of public sector undertakings along with a hike in the number of private sector enterprises. This was due to the fact that many public sector organizations worldwide were either acquired by large private sector enterprises or merged with them. The explanation to this merger and acquisition trend as observed in 2006 and 2007 lay in the robust growth recorded by the Private Equity Funds. The other factors propelling this trend were the emphasis on short term earnings growth and the strict regulatory structure of public sector enterprises. This merger and acquisition trend towards increased privatization of public sector holdings was observed in Europe, Brazil, North America, and China. Europe in that period hosted a strong investment market, which catered to the public to private sector transition of companies. 2.3.2 MORE ON PRIVATE EQUITY DRIVEN INTERNATIONAL MERGER AND ACQUISITION TRENDS Private equity transactions had been the buzzword for the world economy in 2007 and 2006. The real estate sector and the energy sector witnessed much of this type of activity. Private equity firms were working overnight for augmenting proprietary deal flows.
China was a unique case in point. There the powerful trend towards mergers and acquisitions involving private equity dealings comprised a lot of policy and regional diversity. A great amount of equity capital flowed into China from US, Japan, Israel, and Europe as retail sector investments. This was primarily aimed at tapping China's heightened domestic consumer demand. Focus shifted to the northern and western regions of China as costs escalated for the commercial hubs alongside the eastern seacoast. In the US, private equity funds succeeded in raising more than $200 billion in this period for international merger and acquisition dealings. As these types of funds usually possessed a time frame of 3 to 5 years for putting the new invested capital to work, they were expected by the analysts to power heightened merger and acquisition activities across major global markets for the coming decade. For Europe the general prediction was that of a high transactional demand related to private equity analysts observed that certain European markets were characterized by different financial advantages and tax structures. Western European nations possessed well oiled legal machinery and conducive investment climates. In particular Britain exhibited a strong market for public to private investments. Equity investment in Brazil turned attractive with the program called Novo Mercado. Brazilian pension funds turned out to be a prime investment force. Their bankruptcy code got a revision. The elected government was supportive of a free market structure. In North America domestic dealings in M&A executed by private equity investors of USA displayed a robust international component. The observed trend was that a majority of the funds wanted to secure offshore partners for distribution, contract manufacturing or joint ventures. This kind of cross-border transactions entailed a careful planning for tax obligations arising out of fund repatriation. 2.3.3 MORE ON MERGER AND ACQUISITION TRENDS Global leveraged buyouts figures for 2006 were above US$ 800 billion. This was more than twice the comparable figure for 2005. It constituted around 20 % of US international mergers and acquisitions. However, even then it was not a significant component of twhe world equity and debt market.
In 2006 North America saw vigorous leveraged buyout activities, which amounted to half of the world activity in that field. Europe witnessed a fairly heightened activity in the arena of leveraged buyouts; while Asia had a relatively slow increase. France, Netherlands, and Germany were the biggest European buyout markets in 2006. Table – 2.1 Mergers & Acquisition Deals in India for first financial quarter 2010 Sector Telecom Pharmaceutical BFSI Metal and Mining Energy Other sectors No. of Deals 3 4 6 4 4 39 Value in USD million 22732.26 3958.29 2651.54 1483.15 1320 1919.00 Share in per cent 67.19 11.02 7.84 4.38 3.90 5.67
III. Evolution of total M&A deals by target region (2000-2006)
16000 EU (Deals) 14000 EU (Value) US (Deals) US (Value) Asia (Deals) Asia (Value) 1800 1600 12000 1400 10000 1200 2000
Number 8000 of deals
1000 value of deals
4000 400 2000 200 0
2000 2001 2002 2003 2004 2005 2006
14 March 2008
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III. Worldwide M&A
45000 4500 40000 4000 35000 30000 Number of deals 3500 3000
0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Number of deals
Value in bn euro
14 March 2008
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Value in billion euros
Industry Profile & Company Profile
3.1 THE INDUSTRY PROFILE Information technology (IT) is a broad field that covers all aspects of managing and processing information. IT professionals design, develop, support, and manage computer software, hardware, and networks. From the exuberant growth of its early years to the uncertainty of recent times, the IT industry has stabilized—with job growth rates now rising steadily—and continues to change in order to meet the needs of the business world. While the wild optimism that surrounded the IT industry a few years back has been deflated, the IT industry is adapting to a changing market. New developments such as creating infrastructure for mobile technologies will continue to ensure the vitality and viability of the industry. And as the industry responds to new business needs, it will continue to evolve into a mature profession, a profession versatile enough to adapt to new demands and stable enough to support new innovations and developments. IT includes IT and Telecommunication; IT Industries includes, IT Hardware and Software Industries; IT Software Industries include IT Software, IT Services and IT enabled services, IT infrastructure means the physical Infrastructure build by a firm or a builder and sold to an IT Industries for its own use or the Infrastructure build by an IT Industry for its own use. 3.2 THE INDIA SCENARIO In information technology (IT), India has built up valuable brand equity in the global markets. In IT-enabled services (ITES), India has emerged as the most preferred destination for business process outsourcing (BPO), a key driver of growth for the software industry and the services sector. The IT industry is passing through a phase of mergers and consolidations in India largely in line with global trends. Companies are focusing on organic as well as inorganic growth. Indian IT companies are prowling for potential acquisitions both in the domestic as well as foreign markets. 3 Indian software companies – TCS, Infosys, Wipro have all crossed the billion dollar mark. Competition in the Indian IT arena is increasing leaps and bounds with global giants like IBM, Accenture, CSC consolidating their positions and the companies like Cognizant, Kanbay, Patni doing brisk business.
3.3 THE COMPANY PROFILE 3.3.1 HEWLETT-PACKARD PACKARD
Bill Hewlett and Dave Packard graduated in electrical engineering from Stanford University in 1935. The company originated in a garage in nearby Palo Alto during a fellowship they had with a past professor, Frederick Terman at Stanford during the Great Depression. Terman was considered a mentor to them in forming Hewlett . Hewlett-Packard. In 1939, Packard and Hewlett established Hewlett Packard (HP) in Packard's garage with an Hewlett-Packard initial capital investment of US$538. Hewlett and Packard tossed a coin to decide w whether the company they founded would be called Hewlett Hewlett-Packard or Packard-Hewlett Packard Hewlett won the coin toss but named their electronics manufacturing enterprise the "Hewlett "Hewlett-Packard Company". HP incorporated on August 18, 1947, and went public on November 6, 1957.
The company has been prospering ever since as its profits grew from five and half million dollars in 1951 to about 3 billion dollars in 1981. The pace of growth knew no bounds as HP's net revenue went up to 42 billion dollars in 1997. Starting with manufacturing audio oscillators, the company made its first computer in the year 1966 and it was by 1972 that it introduced the concept of personal computing by a calculator first which was further calculator advanced into a personal computer in the year 1980. The company is also known for the laser-printer which it introduced in the year 1985. printer
SWOT ANALYSIS OF HP Strengths: • • Server Compaq-Server category and overall storage HP-High-end storage
Strong brand recognition
Weaknesses: • • • Developing a direct distribution model Consulting and outsourcing (low market share) Compaq-Printers (low market share)
Opportunities: • • • • Merger could improve economics and innovation Economies of scale Strengthen leadership in storage Market growth in IT services
Threats: • • Dell increases pressure in the low-end server market IBM, Dell and new entrants erode more market share
The company is better known as Compaq Computer Corporation. Compaq was founded in February 1982 by Rod Canion, Jim Harris and Bill Murto, three senior managers from semiconductor manufacturer Texas Instruments. Each invested $1,000 to form the company. Their first venture capital came from Ben Rosen and Sevin Rosen Funds. The original Compaq PC was first sketched out on a placemat by the founders while dining in a local Houston restaurant, House of Pies. It had the charm of being called the largest manufacturers of personal computing devices worldwide. The company was formed by two senior managers at Texas Instruments. The name of the company had come from-"Compatibility and Quality". The company introduced its first computer in the year 1983 after at a price of 2995 dollars. In
spite of being portable, the problem with the computer was that it seemed to be a suitcase. Nevertheless, there were huge commercial benefits from the computer as it sold more than 53,000 units in the first year with a revenue generation of 111 million dollars.
3.4 HP AND COMPAQ
On September 3, 2001, HP announced that an agreement had been reached with Compaq to merge the two companies. In May, 2002, after passing a shareholder vote, HP officially merged with Compaq. Prior to this, plans had been in place to consolidate the companies' product teams and product lines.
The merger occurred after a proxy fight with Bill Hewlett's son Walter, who objected to the merger. Compaq itself had bought Tandem Computers in 1997 (which had been started by ex-HP employees), and Digital Equipment Corporation in 1998. Following this strategy, HP became a major player in desktops, laptops, and servers for many different markets. After the merger with Compaq, the new ticker symbol became "HPQ", a combination of the two previous symbols, "HWP" and "CPQ", to show the significance of the alliance and also key letters from the two companies Hewlett-Packard and Compaq (the latter company being famous for its "Q" logo on all of its products.)
Merger Of HewlettHewlett-Packard With Compaq
4.1 RATIONALE OF MERGER Carly Fiorina, who became the CEO of HP in the year 1999, had a key role to play in the merger that took place in 2001. She was the first woman to have taken over as CEO of such a big company and the first outsider too. Her basic aim was to modernize the culture of operation of HP. She laid great emphasis on the profitable sides of the business. This shows that she was very extravagant in her approach as a CEO. In spite of the growth in the market value of HP's share from 54.43 to 74.48 dollars, the company was still inefficient. This was because it could not meet the targets due to a failure of both company and industry. HP was forced to cut down on jobs and also be eluded from the privilege of having Price Water House Cooper's to take care of its audit. So, even the job of Fiorina was under threat. This meant that improvement in the internal strategies of the company was not going to be sufficient for the company's success. Ultimately, the company had to certainly plan out something different. So, it was decided that the company would be acquiring Compaq in a stock transaction whose net worth was 25 billion dollars. Apart from these reasons there are other driving factors that contributed to this merger are described below; For HP, the merger can be considered to be an occasion to take a competitive advantage over its rivals like IBM as in this case and also be of some interest to the shareholders as well. If one sees this merger from the eyes of Fiorina, it would be certain that the shareholders have a lot to gain from it. The reason for the same is the increment in the control of the market. So, even of the conditions were not suitable from the financial perspective, this truth would certainly make a lot of profits for the company in the future. Two organizations get involved in mergers as they want to expand their market both on the domestic and the international level. Integration with a domestic company doesn't need much effort but when a company merges internationally as in this case, a challenging task is on head. A thorough situation scanning is significant before putting your feet in International arena. Here, the competitor for HP was Compaq to a large degree, so this merger certainly required a lot of thinking. Organizations merge with the international companies in order to set up their brands first and let people
know about what they are capable of and also what they eye in the future. This is the reason that after this merger the products of Compaq would also have the logo of HP. Once the market is well-known, then HP would not have to suffer the branding created by Compaq. They would be able to draw all the customers of Compaq as well. Any company by acquiring another or by merging makes an attempt to add to its efficiencies by increasing the operations and also having control over it to the maximum extent. We can see that HP would now have an increased set of employees. The only factor is that they would have to be controlled properly as they are of different organizational cultures. An improvised organization of monetary resources, intellectual capital and raw materials offers a competitive advantage to the companies. When such companies merge, many of the intellects come together and work towards a common mission to excel with financial profits to the company. Here, one can't deny the fact that even the top brains of Compaq would be taking part in forming the strategies of the company in the future. When companies merge with another company, later they can put up for sale as per as the needs of the company. This could also be done partially. If HP feels that it would not need much of warehouse space it can sell the same at increased profits. It depends on whether the company would now be regarded a s a make to stock or a make to order company. Services get copyrights which enhances the level of trade. Additional Warehouse services and distribution channels offer business values. Here HP can use all such values integrated with Compaq so as to increase its prospects. 4.2 TARGET SELECTION 4.2.1 UNIQUE OPPORTUNITY The position of the enterprise is bound to better with the merger. The reason for the same was that now the value creation would be fresh, leadership qualities would improve, capabilities would improve and so would the sales and also the company's strategic differentiation would be better than the existing competitors. Other than this, one can also
access the capabilities of Compaq directly hence reducing the cost structure in becoming the largest in the industry. Finally, one could also see an opportunity in reinvesting. 4.2.2 STRONGER COMPANY The profitability is bound to increase in the enterprise, access and services sectors in high degrees. The company can also see a better opportunity in its research and development. The financial conditions of the company with respect to its EBIT and net cash are also on the incremental side. 4.2.3 COMPELLING ECONOMICS The expected accumulation in IIP gains would be 13% in the first financial year. The company could also conduct a better segmentation of the market to forecast its revenues generation. This would go to as much as 2 and a half billion dollars of annual synergy. 4.2.4 ABILITY TO EXECUTE As there would be integration in the planning procedures of the company, the chances of value creation would also be huge. Along with that the experience of leading a diversified employee structure would also be there.
Expectations From Merger Of HP And Compaq
The merger of HP with Compaq will create superior customer value by expanding its product range and together HP and Compaq can focus on R & D in a greater extend. The second best benefit that the merger will emerge is cost benefit by generating cost synergies reaching approximately $2.5 bn annually. Drive a significantly improved cost structure, approximate assets of $56.4 billion, annual revenues of $87.4 billion and annual operating earnings of $3.9 billion. Adds up to world-class innovation and quality through the merger of two of the leading IT companies of the world. Larger PC position resulting from the merger likely to increase risk and dilute shareholders interest. Operations in more than 160 countries and over 1,45,000 employees. Expand the numbers of the company’s service professionals. Improves access to the market with Compaq’s direct capability and low cost structure. Work force reduction by around 15,000 employees saving around $1.5 billion per
year. Improve HP’s market share. STRENGTHS OF COMPAQ Compaq –No 2 in the PC business and stronger on the commercial side than HP. HP was stronger on the consumer side. Together they would be No 1 in market share in 2001. Compaq was strong in low-end industry standard (Intel) servers. Compaq: best known for its PCs, also had enterprise businesses that it had built up through earlier acquisitions of its own. The above are some of the driving forces that resulted into the merger of HP and Compaq into HPQ. If the total case is being analyzed, it can be seen that the motives that made these companies to agree for merger is for same product line and shareholder value addition. Apart from these reasons value creation and improved cost structure is also motives behind this merger. 4.3 TARGET VALUATION
Figure – 4.1 DEAL VALUATION
Structure Exchange ratio Current value Ownership Accounting Expected closing
Stock-for-merger 0.6325 ofan HP share per Compac share Approx $ 25 bn HP shareholders 64%; Compac 36% Purchase First half of 2002
Figure – 4.2 FINANCIAL HILIGHTS
Particular Total revenues Assets Operating earnings Number of employees Market capitalization(as on 31st august,2001)
HP 47.0 32.4 2.1 88,500 45,109
COMPAC 40.4 23.9 1.9 70,100 20,995
HPQ 87.4 56.4 4.0 1,58,600 66,104
Figure – 4.3
EXCHANGE RATIO BASED ON MPS
Exchange Ratio (based on MPS)
SHARES ISSUED TO COMPAC TOTAL SHARES IN HPQ
= MPS OF TARGET CO+ MPS OF ACQUIRING CO $ 12.35+ %18.9 (PREMIUM) =$ 23.21 =$ 14.68/$23.21 10.76bn 30.23bn
Figure – 4.4 EPS CALCULATIONS
Particulars HP EPS before 0.21 merger EPS of HPQ after 0.31 merger
COST & BENEFIT ANALYSIS (present value -$bn) • PVHP = 19.47 bn shares x $23.21 = $ 451.89 bn • PVCompaq = 17.02 bn shares x $12.35 = $210.19 bn •PVHPQ = 451.89+ 210.19 + 1.5 = $ 664 bn COST FOR HP ( in $ bn) • Cost for HP = PVHPQ – PVCompaq •No. of shares to Compaq Corp. = 10.76 bn •Total no. of shares after merger =30.23bn £= 10.76 = 0.355
30.23 = 0.355 x 664 bn = 235.72 Cost for HP Ltd. = 235.72 – 210.19 = $ 25.53bn BENEFIT FOR HP & COMPAQ Benefit for HP = PVHPQ - (PVHP + PVCompaq) =$ 664 bn - ($ 451.89 bn + $210.19 bn) = $ 1.5 bn Benefit for Compaq = Cost for HP = $ 25.53bn If we look at the deal valuation, it can be observed that the exchange ratio of HP share with Compaq is 0.6325 and the current value is about $25 bn, the ownership is distributed in 64:36 ratios. The total revenue of $47 bn is earned by HP, while Compaq has annual revenue of $ 40.4 bn and combined firm HPQ has annual revenue of $ 87.4 bn. The market capitalization of both the companies is 45,109 and 20,995 for HP and Compaq respectively, whereas the market capitalization of HPQ is about 66,104. The EPS of HP and Compaq before merger is .21 and .33 and the EPS of HPQ is about .31. From the cost and benefit analysis, it is observed that the present value of HP is about $495.89 bn. Similarly the present value of Compaq is about $210.19 bn. But when they merged the present value of merged company HPQ is about $664 bn, which is more than the cumulative present value of both the companies. The analysis of the valuation shows 8% to 46% over exchange ratios implied by average prices for the 10 trading days prior to announcement, with a median premium of 23%. 7% to 58% over exchange ratios implied by average prices for the 20 trading days prior to announcement, with a median premium of 23%.
12% to 29% over exchange ratios implied by average prices for the 1 trading days prior to announcement with a median premium of 15%. Both the companies seem to have pegged their valuation based on the growth of IT industry. After all, there is no other industry that has a growth prospective that IT industry has it is obvious that the companies value them at a higher rate. The revolution in IT industry and increased use of IT and IT-related products can be considered as a factor of such valuation. Secondly, the growth of banking and financial sector and increased use of IT by them also contribute to the valuation. 4.4 DUE DILIGENCE Due diligence is one of the methods used to study, investigate, and evaluate business opportunities. Although the term was popularized in the 1980s, the activity has been a part of business transactions for years. Due diligence is typically done before major decisions are made or shortly after they are announced to the public. The scope of due diligence determines the length and cost of the procedure and typically varies with factors such as the size and complexity of the organization or businesses that are under scrutiny; the size of the deal; the relative risk to all parties involved; and time and budget constraints. What is due, or sufficient, diligence varies with every situation. At a minimum, due diligence typically analyzes the following: o Historical activity (prior five years’ worth, if available). o Ownership and structure of entity. o Management team. o Products and services, including market share by category. o Assets and liabilities. o Information systems and technology. o Organizational culture Due diligence is universally conducted as part of the analysis for mergers and acquisitions, increasingly, it is used when evaluating all types of business combinations or affiliation agreements Fiorina’s ability to convince internal skeptics, such as her CFO, was helped by the thoroughness of her approach. Dan Plunkett, an experienced external consultant and longtime
personal advisor of Fiorina observed: “Carly is very systematic. She is a very planning leader, both on a large scale and on the tactical level. We got involved directly with the due diligence of understanding the two cultures, the two sets of leadership, how they would fit together and what would be needed to make these teams work effectively as one team.” Plunkett said: HP saw itself, and the evidence supported that view, as a culture of consideration, thoughtfulness, and planning—a more careful culture. Compaq saw itself more as a culture of “ready, shoot, aim.” They were much quicker to act. They debated less, discussed less, and considered less before they took action. And HP saw itself as quite different from that. There were some other quite interesting findings. For instance, there was a perception that Compaq held their people more accountable than HP. But as we looked into the two cultures, the Compaq people admitted that they certainly had room to grow in that area, and that HP was not quite as bad as people perceived it as far as delivery and sense of accountability, responsibility. It can seen that was largely due to the progress that HP had made in the couple of years before the Compaq acquisition came about. It was a culture that had become much more accountability-oriented, much more aggressive, much more willing to take risks, at least among the leadership of the organization, and much more in touch with the customer and the competition. Compaq was perceived as much more customer and competitor focused than HP. In fact, the HP that bought Compaq no longer fit the old perception—it was much closer to Compaq in that regard. Plunkett also observed that top management used the challenges the acquisition faced, including the proxy fight, as a kind of rallying call. He said that because they had an “outside enemy to fight” the two teams started very early on to work together as one team.
Problems & Post – Merger Integration
5.1 PROBLEMS DURING MERGER There are a number of mergers and acquisitions that fail before they actually start to function. In the critical phase of implementation itself, the companies come to know that it would not be beneficial if they continue as a merger. This can occur in this merger between HP and Compaq due to the following reasons. Some of the problems of this merger are, the owners oppose the deal, merger of two companies which are not doing well at that particular time. These problems are explained below in detail; 5.1.2 CONVERSATIONS ARE NOT IMPLEMENTED Because of unlike cultures, ambitions and risk profiles; many of the deals are cancelled. As per as the reactions of the owners of HP, this seems to be extremely likely. So, motivation amongst the employees is an extremely important consideration in this case. This requires an extra effort by the CEO, Fiorina. This could also help her maintain her position in the company. 5.1.2 LEGAL CONTEMPLATIONS Anti-competitive deals are often limited by the rules presiding over the competition rules in a country. This leads to out of order functioning of one company and they try to separate from each other. A lot of unnecessary marketing failures get attached to these conditions. If this happens in this case, then all that money which went in publicizing the venture would go to be a waste. Moreover, even more would be required to re-promote as a single entity. Even the packaging where the entire inventory from Compaq had the logo of HP would have to be re-done, thus hampering the finance even further. 5.1.3 COMPATIBILITY PROBLEMS Every company runs on different platforms and ideas. Compatibility problems often occur because of synchronization issues. In IT companies such as HP and Compaq, many problems can take place because both the companies have worked on different strategies in the past. Now, it might not seem necessary for the HP management to make changes as per as those from Compaq. Thus such problems have become of greatest concern these days.
5.1.4 FISCAL CATASTROPHES Both the companies after signing an agreement hope to have some return on the money they have put in to make this merger happen and also desire profitability and turnovers. If due to any reason, they are not able to attain that position, then they develop a abhorrence sense towards each other and also start charging each other for the failure. 5.1.5 HUMAN RESOURCE DIFFERENCES Problems as a result of cultural dissimilarities, hospitality and hostility issues, and also other behavior related issues can take apart the origin of the merger. 5.1.6 LACK OF DETERMINATION When organizations involve, they have plans in their minds, they have a vision set; but because of a variety of problems as mentioned above, development of the combined company to accomplish its mission is delayed. Merged companies set the goal and when the goal is not accomplished due to some faults of any of the two; then both of them develop a certain degree of hatred for each other. Also clashes can occur because of bias reactions. 5.1.7 RISK MANAGEMENT FAILURE Companies that are involved in mergers and acquisitions, become over confident that they are going to make a profit out of this decision. This can be seen as with Fiorina. In fact she can fight the whole world for that. When their self-confidence turns out into overconfidence then they fail. Adequate risk management methods should be adopted which would take care of the effects if the decision takes a downturn. These risk policies should rule fiscal, productions, marketing, manufacturing, and inventory and HR risks associated with the merger. 5.2 POST MERGER INTEGRATION The new HP developed a white paper giving complete details of its post-merger product strategy. The HP and Compaq brand names were retained for desktop PCs and notebooks for both consumers and commercial segments. The merged entity supported Compaq's brand name for its servers while it continued with HP for workstations. The electronic shopping sites of both the companies were also integrated.
To make the merger work, the new HP initially focused on two areas - avoiding culture clashes internally and reducing any problems to the customers. The company devoted a significant amount of time in planning to minimize any instance of culture clashes that usually happened in such mega-mergers. The task of ensuring this was given to Susan Bowick, HP's Senior VP of HR. She put all employees through a training workshop named as 'Fast Start,' designed to explain the merged entity's new organizational structure and allow employees overcome concerns about their new co-workers. HP also made efforts to strengthen its image as a single unified company.
Evaluation of Merger Between HP and Compaq
6.1 DOES THE MERGER MAKE BUSINESS SENSE Soon after the HP-Compaq merger deal was approved by the HP's board and its shareholders in March 2002, industry analysts termed the deal as a strategic blunder. Critics ridiculed Fiorina by saying that one bad PC business merged with another bad PC business does not make a good PC company. Many analysts felt that the synergies HP foresaw would not materialize easily. They said that the merged order to beat Dell in PCs, while constantly investing money in research and development and consulting to compete with IBM and Sun Microsystems. In the high-end server markets, IBM and Sun Microsystems were constantly introducing new products. Since more than half of the new HP's sales came from low-margin PCs, analysts expressed concerns that it would not have enough cash to invest in R&D in order to compete in the high-end market. 6.2 DOES THE MERGER MAKE ECONOMIC SENSE A few HP divisions that were big revenue earners were not able to contribute correspondingly to profits. An analysis of the company's business segment revenues in the fiscal 2004 revealed that the Enterprise Storage & Servers and the Personal Systems divisions, the erstwhile Compaq strongholds, brought in revenues of US$ 39.774 billion, comprising approximately 50% of HP's total revenues. However, the operating profits from both these divisions combined were US$ 383 million, less than 1% of the divisions' revenues. Moreover, the total contribution of these two divisions in the overall operating profits of HP of US$ 5.473 billion was just 7%. Another major business of the erstwhile Compaq, HP services which generated revenues of US$ 13.778 billion, witnessed a fall in operating profits from US$ 1.362 billion in fiscal 2003 to US$ 1.263 billion in fiscal 2004. HP's own imaging and printing was the only business division that posted respectable operating profit of $3.847 billion. 6.3 ADVANTAGES OF THE MERGER Even though it seemed to be advantageous to very few people in the beginning, it was the strong determination of Fiorina (the CEO of HP) that she was able to stand by her decision. Wall Street and all her investors had gone against the company lampooning her ideas with the saying that she has made 1+1=1.5 by her extravagant ways of expansion.
Fiorina had put it this way that after the company's merger, not only would it have a larger share in the market but also the units of production would double. This would mean that the company would grow tremendously in volume. Her dream of competing with the giants in the field, IBM would also come true. She was of the view that much of the redundancy in the two companies would decrease as the internal costs on promotion, marketing and shipping would come down with the merger. She said that the company requires being consistent with creativity, improvement and modification. This merger had the capability of providing exactly the same. 6.4 OPPOSITION TO THE MERGER In fact, it was only CEO Fiorina who was in favor of going with the merger. This is a practical application of Agency problem that arises because of change in financial strategies of the company owners and the management. The position of the company as a larger supplier of PCs would certainly increase the amount of risk and involve a lot of investment as well. Another important reason in this context is that HP's prime interest in Imaging and Printing would not exist anymore as a result diluting the interest of the stockholders. In fact the company owners also feel that there would be a lower margin and ROI. The market position in high-end servers and services would still remain in spite of the merger. The price of the PCS would not come down to be affordable by all. The requisite change in material for imaging and printing also would not exist. This merger would have no effect on the low end servers as Dell would be there in the lead and high-end servers either where IBM and Sun would have the lead. The company would also be eluded from the advantages of outsourcing because of the surplus labor it would have. So, the quality is not guaranteed to improve. Finally, the merger would not equal IBM under any condition as thought by Fiorina. 6.4.1 HUGE INTEGRATED RISKS There have been no examples of success with such huge mergers. Generally when the market doesn't support such mergers, don't do well as is the case here. When HP could not manage its organization properly, integration would only add on to the difficulties. It would be even more difficult under the conditions because of the existing competitions between HP and Compaq. Being prone to such risky conditions, the company would also have to vary its
costs causing greater trouble for the owner. The biggest factor of all is that to integrate the culture existing in the two companies would be a very difficult job. 6.4.2 FINANCIAL IMPACT This is mostly because the market reactions are negative. On the other hand, the position of Compaq was totally different from HP. As the company would have a greater contribution to the revenue and HP being diluted at the same time, the problems are bound to develop. This would mean that drawing money from the equity market would also be difficult for HP. In fact this might not seem to be a very profitable merger for Compaq as well in the future. The basic problem that the owners of the company had with this merger was that it would hamper the core values of HP. They felt that it is better to preserve wealth rather than to risk it with extravagant risk taking. This high risk profile of Fiorina was a little unacceptable for the owners of the company in light of its prospects. So, as far as this merger between HP and Compaq is concerned, on side there was this strong determination of the CEO, Fiorina and on the other side was the strong opposition from the company owners. This opposition continued from the market including all the investors of the company. So, this practical Agency problem was very famous considering the fact that it contained two of the most powerful hardware companies in the world. There were a number of options like Change Management, Economic wise Management, and Organizational Management which could be considered to analyze the issue. But this case study can be solved best by a strategy wise analysis. 6.5 HP TODAY • • • Total Revenue: $118,364 million (2008) 13.5% growth over prior year Net Income: $8,329 million (2008)
• 14.7% growth over prior year
HP Market Share • Leading global PC market for shipments • • • 2006 – Took market leadership from Dell 18% HP, 14% Dell, 11% Acer, 7% Lenovo (2008)
Leading global server market • 30% market share in 2008
Leading blade servers segment • 47% HP, 26% IBM (2008)
Leading global printers market • • 40% market share in 2008 Competitors: Xerox, Canon
Storage market • EMC, HP (2008)
IT services • • 2nd largest player (EDS acquisition in 2008) Competitors: Accenture, IBM
Branding • 12 in Top 100 best global brands (Interbrand, 2008)
6.6 INTEPRETATION From the above, it can be observed The key advantages of this merger are the increase in capacity and greater market accessibility. Along with this the merged company HPQ is leading the market in competition with companies like IBM and DELL. This merger was opposed by the owner of the company, but supported by the CEO, which gave rise to Agency problem. The over confidence of Fiorina (the CEO of HP) can be considered as a problem for successful merger and post-merger integration. The amount spent in this merger could also be expended in Research and Development, which on the other hand can give a good result to HP. But, if the present position of HP is analyzed, it can be said that the merger has helped the company to grow. The growth in total revenue and net income of HP is about 13.5% and 14.7%, which indicates the good performance of the company. In case of market share, HP is now leading in each and every section. In PC, HP has a market share of 18%, while its competitors DELL and IBM have lesser market share. HP has a huge market share of 30% and 47% in case of server and blade server section. Similar is the case in Printers section, which HP holds about 40%. HP is now the second largest player in the IT industry and ranked 12 in top 100 best global brands. From the above interpretation, it can be said that, though the merger between HP and Compaq did not showed a great result immediately, but in long-run, the merger proved to be successful. 6.7 LESSON FROM THE CASE The HP and Compaq deal is one of the largest M&A deal in IT industry and it was a horizontal merger. In today’s volatile market, where major M&A deals are showing negative growth, but this merger really helped HP to grow and compete with its global competitors. This merger also helped HP to be a leader in the market. From current statistics, it is observed that HP is a leader in each and every section, with 18% in PC, 30% in server, 47% in blade server, 40% in printer section. Now, it is also the second largest player in the IT industry.
Though there were some problems in the merger, but Fioria’s strong decision for the merger (which was also opposed by the owners of the company) ended with growth to the company. 6.8 CONCLUSION The talk between the CEO’s of both the company for a licensing agreement went for more than eight months and finally resulted with the biggest merger between two global IT players. From the chart give above, it is clear that, there is growth in HPQ, which is constant and steady. The merger between HP and Compaq has both positive and negative implications. In one hand, there is capacity generation, value addition to both the entities, whereas, on the other hand, there is problem in implementation of strategy. But, it can now said that, the basic objective behind the merger is fulfilled, i.e. HP is now the second largest player in IT industry and one of the fast growing companies of the world.
BIBLIOGRAPHY Annual Report of HP Annual Report of Compaq Annual Report of HPQ
http://meaindia.nic.in/indiapublication/Information%20Technology.htm http://www.stpm.soft.net/ince.htm http://www.economywatch.com/business-and-economy/information-technologyindustry.html http://www.educationinfoindia.com/itfaq.htm http://www.emergence.nu/events/budapest/ahuja.pdf
http://finance.yahoo.com Williams, Molly, and Gary McWilliams, “Family Affair: HP Deal’s Fate Rests with Skeptical Heirs,” The Wall Street Journal, November 9, 2001, p. A1. “Hewlett-Packard Co.,” Notable Corporate Chronologies, Business and Company Resource Center, 2001, <http://galenet.com/ servlet/BCRC> (February 18, 2003). “HP Executive Team Bios: Carleton S. (Carly) Fiorina,” HP Home Page, <http://www.hp.com/hpinfo/execteam/bios/fiorina.html>. Lohr, Steven, “A Family Struggle, A Company’s Fate,” The New York Times, December 2, 2001, p. C1, col. 2. Fiorina, Carly. “The Case for the Merger.” Speech delivered at the Goldman Sachs Technology Conference on February 4, 2002. Williams, Molly, “HP’s Deal for Compaq Has Doubters as Value of Plan Falls to $20.52 Billion,” The Wall Street Journal, September 5, 2001, p. A3. “Compaq: Fiorina’s Folly of HP’s Only Way Out?” Time, Vol. 158, Issue 12, September 17, 2001. Williams, Molly, “As Merger Teeters, HP’s Fiorina Faces the Sales Challenge of Her Career,” The Wall Street Journal, December 12, 2001, p. B1. Williams, Molly, “HP’s Deal for Compaq Has Doubters as Value of Plan Falls to $20.52 Billion,” The Wall Street Journal, September 5, 2001, p. A3. Williams, Molly, “Hewletts Reject Deal to Join HP, Compaq,” The Wall Street Journal, November 7, 2001, p. A3.
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