Hp compaq a failure or success

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Case about HP and COmpaq merger.. After 6 years the merer is proven succesfull..

Case about HP and COmpaq merger.. After 6 years the merer is proven succesfull..

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  • 1. HP – COMPAQ: A Failed Merger?
    Annadurai Anbarasu
  • 2. Contents
    • Background HP & Compaq
    • 3. Why Merger ? Reasons?
    • 4. Does it make sense? Positives and Negatives of Merger
    • 5. Merger Strategy
    • 6. Challenges & SWOT Analysis
    • 7. Achieved Benefits for Shareholders and Customers
    • 8. Present status – Leadership across portfolio
    • 9. Conclusion
  • Background – HP
    30s
    00s
    90s
    80s
    70s
    60s
    50s
    1939 A new company; HP inventsfirst product
    1994Planet Partners program launched
    1999
    Agilent Spin-off
    1957Going Public
    1966 HP enters computer industry;HP Labs opens
    1st HP Computer
    1972 Replacing the slide rule—HP invents the pocket calculator
    1980 Our first PCs
    1984 A print revolution: HP introduces both the ThinkJet and the LaserJet
    2002HP-Compaq merger
    2005Halo Collaboration Studio
    2008Commitment to cloud computing
    1959Going global
  • 10. Background – Compaq
    Entered Server Market
    HP Acquired Compaq
    Rod, Jim and Bill Founded COMPAQ
    DEC Acquisition
    1982
    1990
    1997
    1984
    2002
    1998
    2000
    Introduced Deskpro 286/386 based systems
    Tandem Acquisition
    No 1 in PC worldwide
  • 11. Why Merger?
  • 12. HP-COMPAQ Merger - Positives
    Improved Economics and Innovation
    • Combined company creates economies of scale
    • 13. Direct sales channel
    • 14. More flexible distribution model
    Complementary Leadership in Key Markets
    • Industry leading product line in entire server category
    • 15. Industry leader in enterprise storage segment and storage area networks
    • 16. Broader portfolio of products and services
    Strengthened Business Provides Critical Mass in Key Growth Market
    • 65,000 IT architects in 160 countries accelerates growth
    • 17. Better customer loyalty
    • 18. Leading position in mission-critical services, and multivendor support
    Financial Benefits
    • Estimated $2.5 billion in annual cost savings by mid-2004
    • 19. 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
    • 20. 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..
    • 21. HP management had no experience with large merger
    Negative Financial Impact on HP Stockholders
    • Dramatic drop in stock price after proposed merger was announced
    • 22. 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
    • 23. Neither company had successfully transitioned to a direct distribution model
  • MERGER TRANSACTION SUMMARY
  • 24. HP & COMPAQ
    What is strategy?
  • 25. Market reaction
    • US $ 13 Billion lost in first 2 days (HP & COMPAQ combined)
    • 26. 17% loss in next 2 weeks
    • 27. At the same time the competitors like:
    • 28. DELL went up by 80%
    • 29. Lexmark went up by 60%
  • Pre-merger BCG matrix
    High
    Servers
    Pocket computers (PDA)
    Laptops & Desktops
    Industry Growth Rate
    Low
    Printers, Printer supplies
    High
    On-line storage and IT services
    Pocket computers (PDA)
    Low
    Storage
    Servers
    Laptops & Desktops
    Low
    High
    Relative Market share
  • 30. Post-merger BCG matrix
    Services
    Software
    High
    Industry Growth Rate
    Laptop/Notebooks
    Servers
    Storage
    PC’s/Desktops
    Low
    Printers, Printer supplies
    Low
    High
    Relative Market share
  • 31. Challenges
    Competition : As HP and Compaq smooth out their merger, the industry – and their competitors – move on to bigger and better things
    Blending in : The merged company needs to be a “hybrid enterprise
    Meshing cultures : INCREASE MORALE & AVOIDING CULTURE CLASHES
    HP: “deliberative, thorough decision-making”
    Compaq: “fast decision-making and marketing”
    CHOOSING PRODUCTS
    • Fix the PC business
    • 32. Optimize the server business
    • 33. Enhance the service & consulting
    Convincing customers: Customers want a clear “migration path,” especial with regards to discontinued offerings
    Cost:
    Cut Costs while monitoring revenues (about 3B)
    Internal IT: Integrating internal IT applications
  • 34. Swot analysis – post merger
    Threats
    Competitive Environment
    Economic Downturn
    Employee Morale
    Organizational Culture conflict
    Avoid
    Confront
    Opportunities
    Search
    Exploit
    Innovation
    Integration
    Overlapping Management
    Cost Saving
    Overlapping product lines
    Customer Loyalty
    Market Share
    Weaknesses
    Strengths
  • 35. Achieved Benefits for customers
    HP now offers a one-stop shopping experience for global corporate customers
    Broader product portfolio
    Ease of doing business– Enhanced supply and demand visibility
    The economies of scale have helped HP focus on its legacy of manufacturing innovation
    Direct selling capabilities
    Elimination of non-value-added steps, such as administration, and costs
  • 36. Achieved Benefits for Share holders
    In mid-July 2007, Five years after the merger announcement, –
    Shareholder returns were up 46 percent.
    Over the same period:
    The Standard & Poor's IT index had sunk 9 percent
    Competitors like:
    IBM was down 23 percent
    Dell was up only 2 percent
  • 37. LEADERSHIP ACROSS THE PORTFOLIO
    Worldwide market share data for calendar Q4 2010
  • 38. Conclusion
    "The merger accomplished what HP and Compaq set out to do in the first place, providing the critical mass and reach needed to ensure a long-term role in an industry undergoing a fundamental transition,“
    "This deal enabled the merged company to grow revenue and profits in an increasingly competitive marketplace.“
    Jean S. Bozman, VP–Research, International Data Corporation. 8th Nov 2006
    Many predicted HP+Compaq would be 1 + 1 = 1
    Some predicted HP+Compaq would be 1 + 1 = 2
    Very few predicted the reality HP+Compaq would be 1 + 1 = 3
    A SUCCESSFUL MERGER
  • 39. Q & A