The document discusses the merger between HP and Compaq and the challenges that arose. It notes that Carly Fiorina held too many leadership roles at HP, which caused governance issues. Integrating the two company cultures and technologies was also challenging. Restoring stakeholders' trust in HP after the merger was an important issue to address. Recommendations included improving communication, restructuring governance, properly integrating the companies, and creating value to regain stakeholders' confidence.

1. The HP-Compaq Merger: The Battle for the Heart and Soul of a Company

2. Situation Analysis Hewlett Packard’s CEO, along with the President of the company, the Chairman of the Board and the Chief Operating Officer are all in agreement with an aggressive merger acquisition strategy. The problem is that all these company offices are held by the same person. What kind of corporate governance issues arise when all this control is in the hands of a single individual, especially when so many stakeholders are involved?

3. The HP Way Recognize that profit is the best measure of a company’s contribution to society and the ultimate source of corporate strength. Continually improve the value of the products and services offered to customers. Seek new opportunities for growth but focus efforts on fields in which the company can make a contribution. Provide employment opportunities that include the chance to share in the company’s success. Maintain an organizational environment that fosters individual motivation, initiative and creativity. Demonstrate good citizenship by making contributions to the community. Emphasis growth as a requirement for survival.

4. Background – Hewlett Packard Company founded in 1939 by Bill Hewlett and Dave Packard Went public in 1957 Founders believed in strong employee participation – The HP Way 1960’s Company entered computer market 1990’s Organizational issues surfaced Board recommended hiring a more internet savvy CEO

5. Background – Carly Fiorina Selected from 300 applicants Board believed Carly was the savior of HP She was to reinvent the company according to the HP Way Carly’s motto: “Preserve the best and reinvent the rest”

6. Background – Compaq Company founded in 1982 Acquired Digital Equipment Corp. Organizational failure Recruited Michael Capella as new CEO Carly Fiorina and Michael Capella identified possibility of merging firms

7. Analysis Corporate Governance Combining and integrating operations at HP & Compaq Restoring the trust & confidence of stakeholders The Reality: Post-proxy battle, the real challenges now begin!

8. Challenge #1 – Corporate Governance Carly Fiorina holds too many offices as CEO, COO, and Chairman of the board Abuse of power, poor decision-making & miscommunication Board unable to fulfill its responsibilities as a management control mechanism Stakeholders not being fairly represented

9. Challenge #2 – Combining & Integrating Operations Resources Technology Cultures

10. Challenge #3 – Restoring the Trust & Confidence of Stakeholders All stakeholders have been negatively affected Capital Market Stakeholders Product Market Stakeholders Organizational Stakeholders All stakeholders have been negatively affected HP’s reputation of reliability and corporate integrity is in jeopardy Stakeholders now lack trust and confidence in HP

11. SWOT Analysis Strengths: Major market share Brand name recognition HP known for product innovation Organizational structure HP & Compaq to save $2.5 Billion in operating costs by 2004 HP & Compaq combined revenues total $87 Billion Increased cash flow after merger complete

12. SWOT Analysis Weakness: IT Market very unstable Stock price down and fluctuating Shareholders losing confidence in the company Consumers unsure of reliability of new products HP’s market share will only increase to 18.3% Technology company mergers have many problems Little of no revenue growth Poor morale among all employees

13. SWOT Analysis

14. SWOT Analysis Opportunities: Cross selling of products HP and Compaq technologies could complement one another “ E-Services” large opportunity for growth Expansion of services division possible Economic upturn in PC/IT market possible

15. SWOT Analysis Threats: Serious outside threat from PC/Printer competitors Low stock dividends & Low stock price Issues with internal management Poor management / employee morale more layoffs Threat of new entrants into PC/Printer market high Bargaining power of suppliers is high due to only two chips available Bargaining power of buyers is high due to products standardized and undifferentiated Rivalry within industry is intense

16. SWOT Analysis

17. Strategic Alternatives SWOT Analysis Possesses many threats Possesses many strengths Divesture Diversification leads to acquisitions that become substitutes for innovation Declines in performance result in over-diversification, after which business units are often divested Capital invested in a business venture may cause managers to rely on financial constraints rather than strategic controls to evaluate the individual aspects of the business unit’s performance

18. Recommendations Improve Communication with Stakeholders Restructure Corporate Governance Integration of Compaq and HP Create Value and Restore Trust

19. Recommendations Improve Communication with Stakeholders Board of Directors Develop plan that monitors decision making process Shareholders Better analyze the investment strategies of the shareholders Merger progress updates Employees Get them involved Plan for employee suggestions and concerns Apology from Carly Customers Integration progress reports Explanation detailing the added value from the merger

20. Recommendations Restructure Corporate Governance Strategic planning and decision making Reduce Carly’s responsibilities Assign a new Chairman Add a Chief Operating Officer

21. Recommendations Integration of Compaq and HP Corporate cultures Cross-training Plan for employee suggestions and concerns

22. Recommendations Create Value Merger’s expected outcomes More balanced portfolio Doubled customer service team Improved profitability in key areas Increased operating margins Restore Trust All of the recommendations above lead to the restoration of trust by the stakeholders Improved shareholder confidence will show that the plan is working

23. Questions? The HP Way Recognize that profit is the best measure of a company’s contribution to society and the ultimate source of corporate strength. Continually improve the value of the products and services offered to customers. Seek new opportunities for growth but focus efforts on fields in which the company can make a contribution. Provide employment opportunities that include the chance to share in the company’s success. Maintain an organizational environment that fosters individual motivation, initiative and creativity. Demonstrate good citizenship by making contributions to the community. Emphasis growth as a requirement for survival.