Meaning of Merger

It is combining of different business

organizations having similar
entities which results in creation
of new business organization
which grows more rapidly and
success in global market by
expanding customer base.
TYPES OF MERGER:
1. Horizontal merger
2. Vertical merger
3. Conglomerate merger
4. Concentric merger
EXAMPLES
1.Indian Fisheries results merger of Air
India and Kingfisher Airlines
2.Sikkim Bank Ltd. And Union Bank of
India.
3.New Bank of India and Punjab
National Bank.
 INTRODUCTION
*HP is well established in imaging and printing system .
Compaq is well established company in providing PCs.

• HP is known for innovation and quality

Compaq is known for its information technology service which
provides one-stop solution.

• HP’s software and service businesses had great potential

Compaq on other side had a strong distribution channel.
• Carleton S Fiorina strongly in favor of merger
Walter B Hewlett, son of one of the founder member was against
the merger.
 HP Shares fall from $23.5 billion to $17.70 billion as
investors slashed value of deal from $25 billion to $19
billion.

Improved economies and innovation

SWOT Analysis of HP & Compaq
 SWOT of HP

Strengths

1. Imaging and printing system

2. Strong reputation for innovation
3. Strong in UNIX servers.

Weaknesses
1. Declining growth of PC market
2. Weak in server market
 Opportunities
1. Expand services and enterprise
solution divisions
2. Increasing demand of cloud based
services
3. Acquisition of more technology related
patents
Threats
1. Slow growth rate of the PC market
2. Rapid Technological changes
 SWOT of Compaq

STRENGTH:

1. Huge Hardware business

2.Strong distribution channel
3.Known for information technology

WEAKNESS:

1. At time of merger, it hade huge. inventory

2.Dell had strong position in online business
3.Less capable of taking orders and customizing computers
Opportunities

1.Compaq is renowned in pc hardware

2.Serve the customer in a better manner

Threats
1. Competitors are Dell, IBM & HP itself
2. Lack of online business
HP-COMPAQ MERGER POSITIVES

Improved Economics and Innovation

Combined company creates economies of scale

Direct sales channel
More flexible distribution model

Complementary Leadership in Key Markets

Industry leading product line in entire server category

Industry leader in enterprise storage segment
Broader portfolio of products and services
Strengthened Business Provides Critical Mass
in Key Growth Market

Accelerates growth
Better customer loyalty
Leading position in mission-critical services

Financial Benefits

Estimated $2.5 billion in annual cost

Would allow HP to increase investment in the
imaging and printing business
 HP-COMPAQ MERGER NEGATIVES
HP’s Business Portfolio Will Be Worse

Increased exposure in unprofitable PC business

PC market was expected to shrink

The Integration Risk of the Proposed Merger is

Substantial

No significant merger involving computer companies

had ever met expectations: ex. Compaq/Digital,
Tandem..
HP management had no experience with large merger
Negative Financial Impact on HP Stockholders

Dramatic drop in stock price after proposed merger

was announced
Wall Street predicted low estimates for future
financial performance

HP’s Strategic Position Will Not Materially

Improve

Neither company had a profitable PC business model

Neither company had successfully transitioned to a
direct distribution model
 [1]
Revenue US$ 120.357 billion (2012)
[1]
Operating income US$ 9.566 billion (2012)
[1]
Net income US$ -12.65 billion (2012)
[1]
Total assets US$ 108.768 billion (2012)
[1]
Total equity US$ 22.833 billion (2012)
[1]
Employees 331,800 (2012)
1) Leading global PC market for shipments
2006 – Took market leadership from Dell
18% HP, 14% Dell, 11% Acer, 7% Lenovo
2) Leading global server market
30% market share in 2013
3) Leading blade servers segment
47% HP, 26% IBM (2013)
4)Leading global printers market
40% market share in 2013
Competitors: Xerox, Canon
5) IT services
2 nd largest player (EDS acquisition in 2008)
Competitors: Accenture, IBM
6) Branding
#12 in Top 100 Best Global Brands (2008)
#1 in US,
#10 in world for Environment, 2008)