Hp compaq a failure or success


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

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Hp compaq a failure or success

  1. 1. HP – COMPAQ: A Failed Merger?<br />Annadurai Anbarasu <br />
  2. 2. Contents<br /><ul><li> Background HP & Compaq
  3. 3. Why Merger ? Reasons?
  4. 4. Does it make sense? Positives and Negatives of Merger
  5. 5. Merger Strategy
  6. 6. Challenges & SWOT Analysis
  7. 7. Achieved Benefits for Shareholders and Customers
  8. 8. Present status – Leadership across portfolio
  9. 9. Conclusion</li></li></ul><li>Background – HP<br />30s<br />00s<br />90s<br />80s<br />70s<br />60s<br />50s<br />1939 A new company; HP inventsfirst product<br />1994Planet Partners program launched<br />1999<br />Agilent Spin-off<br />1957Going Public<br />1966 HP enters computer industry;HP Labs opens<br />1st HP Computer<br />1972 Replacing the slide rule—HP invents the pocket calculator<br />1980 Our first PCs<br />1984 A print revolution: HP introduces both the ThinkJet and the LaserJet<br />2002HP-Compaq merger<br />2005Halo Collaboration Studio<br />2008Commitment to cloud computing<br />1959Going global<br />
  10. 10. Background – Compaq<br />Entered Server Market<br />HP Acquired Compaq<br />Rod, Jim and Bill Founded COMPAQ<br />DEC Acquisition<br />1982<br />1990<br />1997<br />1984<br />2002<br />1998<br />2000<br />Introduced Deskpro 286/386 based systems<br />Tandem Acquisition<br />No 1 in PC worldwide<br />
  11. 11. Why Merger?<br />
  12. 12. HP-COMPAQ Merger - Positives<br />Improved Economics and Innovation<br /><ul><li>Combined company creates economies of scale
  13. 13. Direct sales channel
  14. 14. More flexible distribution model</li></ul>Complementary Leadership in Key Markets<br /><ul><li>Industry leading product line in entire server category
  15. 15. Industry leader in enterprise storage segment and storage area networks
  16. 16. Broader portfolio of products and services</li></ul>Strengthened Business Provides Critical Mass in Key Growth Market<br /><ul><li>65,000 IT architects in 160 countries accelerates growth
  17. 17. Better customer loyalty
  18. 18. Leading position in mission-critical services, and multivendor support</li></ul>Financial Benefits<br /><ul><li>Estimated $2.5 billion in annual cost savings by mid-2004
  19. 19. Would allow HP to increase investment in the imaging and printing business</li></li></ul><li>HP-COMPAQ Merger - Negatives <br />HP’s Business Portfolio Will Be Worse<br /><ul><li>Increased exposure in unprofitable PC business
  20. 20. PC market was expected to shrink</li></ul>The Integration Risk of the Proposed Merger is Substantial<br /><ul><li>No significant merger involving computer companies had ever met expectations: ex. Compaq/Digital, Tandem..
  21. 21. HP management had no experience with large merger</li></ul>Negative Financial Impact on HP Stockholders<br /><ul><li>Dramatic drop in stock price after proposed merger was announced
  22. 22. Wall Street predicted low estimates for future financial performance</li></ul>HP’s Strategic Position Will Not Materially Improve<br /><ul><li>Neither company had a profitable PC business model
  23. 23. Neither company had successfully transitioned to a direct distribution model</li></li></ul><li>MERGER TRANSACTION SUMMARY<br />
  24. 24. HP & COMPAQ<br />What is strategy?<br />
  25. 25. Market reaction<br /><ul><li>US $ 13 Billion lost in first 2 days (HP & COMPAQ combined)
  26. 26. 17% loss in next 2 weeks
  27. 27. At the same time the competitors like:
  28. 28. DELL went up by 80%
  29. 29. Lexmark went up by 60%</li></li></ul><li>Pre-merger BCG matrix<br />High<br />Servers<br />Pocket computers (PDA)<br />Laptops & Desktops<br />Industry Growth Rate<br />Low<br />Printers, Printer supplies<br />High<br />On-line storage and IT services<br />Pocket computers (PDA)<br />Low<br />Storage<br />Servers<br />Laptops & Desktops<br />Low<br />High<br />Relative Market share<br />
  30. 30. Post-merger BCG matrix<br />Services<br />Software<br />High<br />Industry Growth Rate<br />Laptop/Notebooks<br />Servers<br />Storage<br />PC’s/Desktops<br />Low<br />Printers, Printer supplies<br />Low<br />High<br />Relative Market share<br />
  31. 31. Challenges<br />Competition : As HP and Compaq smooth out their merger, the industry – and their competitors – move on to bigger and better things<br />Blending in : The merged company needs to be a “hybrid enterprise<br />Meshing cultures : INCREASE MORALE & AVOIDING CULTURE CLASHES<br />HP: “deliberative, thorough decision-making”<br />Compaq: “fast decision-making and marketing”<br />CHOOSING PRODUCTS<br /><ul><li>Fix the PC business
  32. 32. Optimize the server business
  33. 33. Enhance the service & consulting</li></ul>Convincing customers: Customers want a clear “migration path,” especial with regards to discontinued offerings<br />Cost: <br />Cut Costs while monitoring revenues (about 3B)<br />Internal IT: Integrating internal IT applications<br />
  34. 34. Swot analysis – post merger<br />Threats<br />Competitive Environment<br />Economic Downturn<br />Employee Morale<br />Organizational Culture conflict<br />Avoid<br />Confront<br />Opportunities<br />Search<br />Exploit<br />Innovation<br />Integration<br />Overlapping Management<br />Cost Saving<br />Overlapping product lines<br />Customer Loyalty<br />Market Share<br />Weaknesses<br />Strengths<br />
  35. 35. Achieved Benefits for customers<br />HP now offers a one-stop shopping experience for global corporate customers<br />Broader product portfolio<br />Ease of doing business– Enhanced supply and demand visibility<br />The economies of scale have helped HP focus on its legacy of manufacturing innovation<br />Direct selling capabilities<br />Elimination of non-value-added steps, such as administration, and costs<br />
  36. 36. Achieved Benefits for Share holders<br />In mid-July 2007, Five years after the merger announcement, – <br />Shareholder returns were up 46 percent. <br />Over the same period:<br />The Standard & Poor's IT index had sunk 9 percent <br />Competitors like:<br />IBM was down 23 percent<br />Dell was up only 2 percent<br />
  37. 37. LEADERSHIP ACROSS THE PORTFOLIO<br />Worldwide market share data for calendar Q4 2010<br />
  38. 38. Conclusion<br />"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,“ <br />"This deal enabled the merged company to grow revenue and profits in an increasingly competitive marketplace.“<br />Jean S. Bozman, VP–Research, International Data Corporation. 8th Nov 2006<br />Many predicted HP+Compaq would be 1 + 1 = 1<br />Some predicted HP+Compaq would be 1 + 1 = 2<br />Very few predicted the reality HP+Compaq would be 1 + 1 = 3<br />A SUCCESSFUL MERGER <br />
  39. 39. Q & A<br />