The Merger Between HP and Compaq
Because of the impacts of price wars in the computer industry, a merger between HP and Compaq seems to be the best solution according to the two company owners. This merger presents the new company an opportunity to differentiate itself, and enhance its sustainable competitive edge in the industry. Prior to this move, the merger meets skepticism from investors and employees in the two companies, which causes the price for stock for HP and Compaq significantly fall the following month after the signing, and announcement of the agreement.
Critiques of this merger cite a list of disadvantages with the agreement. They believe that instead of enhancing growth, the decision to merge the two companies will create a much bigger company, which will cause bigger problems. They believe that the two companies’ competitors will try to swoop in, and acquire solution providers including customers to switch allegiances and change the line of products. Other critiques wonder how any of the two companies will hold onto loyal customers if the logo one of the company’s logo permanently disappears. In addition to this, many worry about the difficulty of blending HP and Compaq including their workers.
According to the chairman and CEO of HP, miss Fiorina, this merger will remove one player in the PC market that experiences an oversupply. The merger will improve the market share of HP across the PC hardware line, and increase the HP’s service unit size. This according to the CEO of HP is an essential move in enabling the merger company enhance its sustainable competitive edge, and compete with the computer industry-giant IBM. The HP CEO argues that the merger creates a technology firm that is full-service, and able to do everything from the sale of PCs and printers to designing complex networks. The two companies’ merger will remove product groups, and minimizing the costs in marketing, shipping, and advertising, while preserving the two companies’ revenues (Anders 34).
As a response, the chairman and CEO of HP mention that the driving factor of the merger between HP and Compaq is a competitive edge positioning. In relation to questions about the chance of the merger surviving, the CEOs state that the distinguishing characteristics between the two companies is the focus of the merger successful consolidation, and not diversification (Anders 35). Responding to questions about the difficulties in blending the two companies together including its employees, the HP CEO responds that significant values in HP’s culture such as change, creativity, and innovation are some of the value that justify the merger between HP and Compaq.
According to details in the Wireless Review journal (32) the synergies from this merger include calling for consolidation of both HP’s and Compaq’s products into four broad operating categories namely imaging and printing, access device, services and information technology infrastructure. Although the two companies remain independent competitive in their individual products even under this agreement, this merger enables them have a complete service technology company able to integrate software and hardware solution while at the same time services to customers. The main synergy because of this merger between HP and Compaq enables looking for more opportunities for acquisition in other lucrative sectors of the industry mostly in consulting.
Apart from the worries and questions from the two companies’ critiques, there are so many concerns and risks surrounding this merger. Before this merger, Compaq is unable to grow despite buying Digital, whereas HP tries to grow internally without success. The merge between these two companies shows that there is an overlap in products, distribution channels, facilities, products, and services. Employee morale is at risk from this merger because the merger has result to numerous layoffs, which is approximately 15,000 employees.
According to research findings of Gartner Group, findings report that the merger of HP and Compaq has failed to achieve an excellent work of presenting the numerous benefits of this merger to justify the ideal concerns, and risks because many know that mergers involving technological companies work on extremely rare cases. Since the completion of the merger agreement, revenues in HP have decreased more than the anticipation of the company. Perhaps more concerning is the fact that these two companies are continuing to lose their market share both in servers, and PCs.
In addition to this, both HP and Compaq keep struggling to resolve their individual company’s direct and indirect channels in sales. There is a risk from the cultural background of these two companies. Details from Merging Hp and Compaq (28) state that the cultural background of both companies is different presenting fears of company integration to take a long time. HP’s culture is on the basis of consensus whereas the culture of Compaq is on the basis of rapid decision making approaches. According to data from various studies relating to the industry, HP is at the top of the ranking table in both markets but is losing ground to its closest competitors. Critiques claim that if this trend continues, Dell will replace HP at the top of the industry (Brkic 32).
Works cited
Anders, George. Perfect Enough: Carly Fiorina and the Reinvention of Hewlett-Packard. New York:
Brkic, Branko. The World of the New Hp: Past, Present, Future. Rivonia (PO Box 2785, Rivonia 2128: ITWeb Ltd., 2002. Print.
Merging Hp and Compaq. Emerald, 2004. Print.
Portfolio, 2003. Print. “Nerve Center – Hp Rattles Its Chattel: Barely Mentioned in the Huge Merger of Hp and Compaq Were the Synergies of Their Network Management Solutions. Compaq’s Temip Technology Turned Out to Be More Than Chattel — It’s Now an Integral Part of the Hp Openview Platform.” Wireless Review. 20.12 (2003): 16. Print.
