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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.
2.
3.
4.

Horizontal merger
Vertical merger
Conglomerate merger
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.
HPs 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


HPs 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

HPs Strategic Position Will Not Materially


Improve
Neither company had a profitable PC business model
Neither company had successfully transitioned to a
direct distribution model

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Revenue

US$ 120.357 billion (2012)

Operating income

US$ 9.566 billion (2012)

Net income

US$ -12.65 billion (2012)

Total assets

US$ 108.768 billion (2012)

Total equity

US$ 22.833 billion (2012)

Employees

331,800 (2012)

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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)