The HP-Compaq Merger Story

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Case Details:

Case Code : BSTR027
Case Length : 16 Pages
Period : 2001
Organization : Hewlett-Packard Company, Compaq Computer Corporation
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Computers

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Future

Since HP and Compaq had already initiated the integration process, they were privy to many key facts about each other's business. If the merger did not materialize, both the companies were potentially vulnerable to insider information being misused.

Also, the companies, as independent entities would face extreme skepticism from the stock markets, which had already shown their disapproval of the proposal. Some industry experts were also worried that Fiorina, Capellas and several key board members and senior executives who had been staunch supporters of the deal, would leave. The merger's failure would also set back the company formally opting out of the deal by $675 million in form of a breakup fee. Analysts also claimed that Compaq would have an especially tough time in the future, as its credibility in the stock market had been badly affected. Another cause of concern was the European Commission expressing fears that the deal would allow HP to dominate PC distribution and therefore fix prices for the entire industry...


Exhibit I: HP's Product Segment Information
Exhibit II: How Would an HP-Compaq Combo Measure Up?
Exhibit III: HP's Consolidated Statements of Operations
Exhibit IV: Compaq's Consolidated Statements of Operations
Exhibit V: HP's Stock Price Chart
Exhibit VI: Compaq's Stock Price Chart
Exhibit VII: A Brief Note on Dell And IBM
Exhibit VIII: Key Financial Ratios of Dell Computers


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