Snouter
09-04-2001, 02:56 AM
Tuesday September 4 1:58 AM ET
HP to Buy Compaq in $25-Billion Deal
By Peter Henderson
SAN FRANCISCO (Reuters) - Hewlett-Packard Co. said it has agreed to buy Compaq Computer Corp. for some $25 billion in stock, as the two computer industry giants seek to compete amid cutthroat pricing and a downturn in sales.
The combined company would have revenues of $87.4 billion, rivaling industry-leader IBM after the merger which is expected to generate cost savings of $2.5 billion by the middle of fiscal 2004, the companies said.
Palo Alto-based HP would own 64 percent of the combined company and Compaq would own 36 percent. HP Chairman and CEO Carly Fiorina would be chairman and CEO of the combined company with Compaq chief CEO Michael Capellas becoming president.
The companies expect the deal to close in the first half of 2002 and project the transaction would add to Hewlett-Packard's pro forma earnings per share in the first full year of combined operations.
Both companies have adopted shareholders rights plans in conjunction with the deal -- the kind of action usually taken to ward off an unwanted, outside bid -- and said details would be filed with securities regulators.
Under the terms of the merger, Compaq shareholders would receive 0.6325 shares of HP for each share owned. That values Houston-based Compaq at $14.68 a share, a nearly 19 percent premium to its closing price of $12.35 on Friday.
Shares were not traded on Monday, the Labor Day holiday in the United States, and the after-hours Instinet system did not show updated prices for Compaq or HP, a Dow component, on Monday in Asian trading hours.
``At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners. Together we will shape the industry for years to come,'' said Fiorina, who became CEO of HP in 1999 and has presided over its recent restructuring.
The combined company would create a more formidable competitor for Sun Microsystems and IBM in the market for corporate servers and a bigger player in the market for personal computers for rivals such as Dell Computer Corp and Gateway Inc .
In a statement, the companies said that the merger would create the largest player in terms of sales of servers, and PCs and handheld devices taken together, with a leading position in consulting services, storage and management software.
The merger comes amid a sharp downturn in sales of personal computers and a sharp retrenchment in corporate spending on information technology after the boom of the late 1990s.
The merged company would have operations in 160 countries and more than 145,000 employees.
HP spokeswoman Rebecca Robboy could not comment on job cuts after the merger but said executives would provide more during a public conference call on Tuesday morning.
The merged company would be based in Palo Alto and operations in Houston would focus on engineering and product development, the companies said.
HP expects annual savings of near $2 billion in the first full year of combined operations from consolidating administration, sales, research and marketing, reducing the cost of goods purchased and selling more servers and PCs directly, Robboy said.
In Asia, where news of the merger broke during the trading day, attention shifted to the implications for important suppliers to both companies in the region. Shares in Singapore-based Venture Manufacturing Ltd, which makes printers for HP, rose. Shares in Taiwan-based suppliers to the U.S. companies also rallied. ''It's a logical move in the consolidation of the PC industry,'' said Bear Stearns analyst Andrew Neff. ``The only question is: 'Can two companies which have faced several challenges independently develop into a competitor?'''
Both Hewlett-Packard and Compaq have outlined strategies to focus their businesses on selling services amid falling prices and tougher competition in the sales of hardware.
The new Hewlett-Packard will be larger than IBM on the side of the business which includes items like personal computers and printers, Neff said. ``They are much bigger in the commodity side of the business.''
Together the two firms had 19 percent of the global PC market in the second quarter of the year, enough to easily take the No. 1 spot which Dell Computer Corp, with 13.4 percent of the market, won recently from Compaq.
But the worldwide market shrunk two percent in the quarter compared to a the period a year ago, International Data Corp said in July, with Compaq's unit shipments down 10.5 percent, HP off 8.6 percent and Dell's share rising to 15.0 percent of the market, which was 30 million personal computers in that quarter.
The merged company would have four main business units, the largest of which would be PCs and handheld devices with $29 billion in revenues for the past four quarters, the companies said.
That would be followed by an IT infrastructure unit, including servers and data storage, which would have $23 billion in revenues, a $20-billion printing division and a $15-billion consulting arm.
----------------------------------------
You better believe there are going to be layoffs as a result of this merger. I am surprised the government regulatory agencies allow for such consolidation of business in the hands of fewer and fewer comapanies. Maybe a deal between Gateway and Dell is next. Still too risky to play speculate with these stocks in my opinion. Let's see if Gateway (GTW) moves up in sympathy with this news tomorrow. It closed Friday at $8.97.
HP to Buy Compaq in $25-Billion Deal
By Peter Henderson
SAN FRANCISCO (Reuters) - Hewlett-Packard Co. said it has agreed to buy Compaq Computer Corp. for some $25 billion in stock, as the two computer industry giants seek to compete amid cutthroat pricing and a downturn in sales.
The combined company would have revenues of $87.4 billion, rivaling industry-leader IBM after the merger which is expected to generate cost savings of $2.5 billion by the middle of fiscal 2004, the companies said.
Palo Alto-based HP would own 64 percent of the combined company and Compaq would own 36 percent. HP Chairman and CEO Carly Fiorina would be chairman and CEO of the combined company with Compaq chief CEO Michael Capellas becoming president.
The companies expect the deal to close in the first half of 2002 and project the transaction would add to Hewlett-Packard's pro forma earnings per share in the first full year of combined operations.
Both companies have adopted shareholders rights plans in conjunction with the deal -- the kind of action usually taken to ward off an unwanted, outside bid -- and said details would be filed with securities regulators.
Under the terms of the merger, Compaq shareholders would receive 0.6325 shares of HP for each share owned. That values Houston-based Compaq at $14.68 a share, a nearly 19 percent premium to its closing price of $12.35 on Friday.
Shares were not traded on Monday, the Labor Day holiday in the United States, and the after-hours Instinet system did not show updated prices for Compaq or HP, a Dow component, on Monday in Asian trading hours.
``At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners. Together we will shape the industry for years to come,'' said Fiorina, who became CEO of HP in 1999 and has presided over its recent restructuring.
The combined company would create a more formidable competitor for Sun Microsystems and IBM in the market for corporate servers and a bigger player in the market for personal computers for rivals such as Dell Computer Corp and Gateway Inc .
In a statement, the companies said that the merger would create the largest player in terms of sales of servers, and PCs and handheld devices taken together, with a leading position in consulting services, storage and management software.
The merger comes amid a sharp downturn in sales of personal computers and a sharp retrenchment in corporate spending on information technology after the boom of the late 1990s.
The merged company would have operations in 160 countries and more than 145,000 employees.
HP spokeswoman Rebecca Robboy could not comment on job cuts after the merger but said executives would provide more during a public conference call on Tuesday morning.
The merged company would be based in Palo Alto and operations in Houston would focus on engineering and product development, the companies said.
HP expects annual savings of near $2 billion in the first full year of combined operations from consolidating administration, sales, research and marketing, reducing the cost of goods purchased and selling more servers and PCs directly, Robboy said.
In Asia, where news of the merger broke during the trading day, attention shifted to the implications for important suppliers to both companies in the region. Shares in Singapore-based Venture Manufacturing Ltd, which makes printers for HP, rose. Shares in Taiwan-based suppliers to the U.S. companies also rallied. ''It's a logical move in the consolidation of the PC industry,'' said Bear Stearns analyst Andrew Neff. ``The only question is: 'Can two companies which have faced several challenges independently develop into a competitor?'''
Both Hewlett-Packard and Compaq have outlined strategies to focus their businesses on selling services amid falling prices and tougher competition in the sales of hardware.
The new Hewlett-Packard will be larger than IBM on the side of the business which includes items like personal computers and printers, Neff said. ``They are much bigger in the commodity side of the business.''
Together the two firms had 19 percent of the global PC market in the second quarter of the year, enough to easily take the No. 1 spot which Dell Computer Corp, with 13.4 percent of the market, won recently from Compaq.
But the worldwide market shrunk two percent in the quarter compared to a the period a year ago, International Data Corp said in July, with Compaq's unit shipments down 10.5 percent, HP off 8.6 percent and Dell's share rising to 15.0 percent of the market, which was 30 million personal computers in that quarter.
The merged company would have four main business units, the largest of which would be PCs and handheld devices with $29 billion in revenues for the past four quarters, the companies said.
That would be followed by an IT infrastructure unit, including servers and data storage, which would have $23 billion in revenues, a $20-billion printing division and a $15-billion consulting arm.
----------------------------------------
You better believe there are going to be layoffs as a result of this merger. I am surprised the government regulatory agencies allow for such consolidation of business in the hands of fewer and fewer comapanies. Maybe a deal between Gateway and Dell is next. Still too risky to play speculate with these stocks in my opinion. Let's see if Gateway (GTW) moves up in sympathy with this news tomorrow. It closed Friday at $8.97.