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    Case Assignment HP - Compaq

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    Subham Chakraborty
    HP and Dell pursued mergers and acquisitions to strengthen their businesses and compete against each other in the PC market. HP acquired Compaq in 2002 to transform itself into an innovative, customer-focused company that could rival Dell and IBM. The merger created economies of scale, a complementary product portfolio, and expected $2.5 billion in annual cost savings. However, the merger also faced significant risks like increased exposure to the struggling PC business, substantial integration challenges, and negative impacts on HP's stock price and financial performance.

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    Case Assignment HP - Compaq

    Uploaded by

    Subham Chakraborty
    130 views2 pages
    HP and Dell pursued mergers and acquisitions to strengthen their businesses and compete against each other in the PC market. HP acquired Compaq in 2002 to transform itself into an innovative, customer-focused company that could rival Dell and IBM. The merger created economies of scale, a complementary product portfolio, and expected $2.5 billion in annual cost savings. However, the merger also faced significant risks like increased exposure to the struggling PC business, substantial integration challenges, and negative impacts on HP's stock price and financial performance.

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    CASE ASSIGNMENT HP -COMPAQ

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    HP and Dell pursued mergers and acquisitions to strengthen their businesses and compete against each other in the PC market. HP acquired Compaq in 2002 to transform itself into an innovative, customer-focused company that could rival Dell and IBM. The merger created economies of scale, a complementary product portfolio, and expected $2.5 billion in annual cost savings. However, the merger also faced significant risks like increased exposure to the struggling PC business, substantial integration challenges, and negative impacts on HP's stock price and financial performance.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    130 views2 pages

    Case Assignment HP - Compaq

    Uploaded by

    Subham Chakraborty
    HP and Dell pursued mergers and acquisitions to strengthen their businesses and compete against each other in the PC market. HP acquired Compaq in 2002 to transform itself into an innovative, customer-focused company that could rival Dell and IBM. The merger created economies of scale, a complementary product portfolio, and expected $2.5 billion in annual cost savings. However, the merger also faced significant risks like increased exposure to the struggling PC business, substantial integration challenges, and negative impacts on HP's stock price and financial performance.

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    CASE ASSIGNMENT M9

    STRATEGIC MANAGEMENT

    BEATING DELL:- WHY HP ACCQUIRED COMPAQ


    SUBMITTED BY

    SUBHAM CHAKRABORTY

    PGDM SAP

    0191PGM002

    WHAT KIND OF CORPORATE LEVEL STARTEGIES DID HP AND DELL PURSUE TO


    STREHNGHTEN THEIR MULTIBUSINESS MODEL

    - HP And Dell have mergerd with each other . The main idea behind the merger was a
    strategic one based on how to transform a venerable but sleepy company, HP, into an
    innovative, customer focussed “New HP” that could rival or beat market leaders in the PC
    Maker Market, Dell and IBM Three powerful forces were creating issues for companies in
    the late 1990s, the Information technology downturn, strong competition and
    transformation of hardware into a commodity Compaq had acquired DEC and lost $9.5
    billion in the process and faced a huge threat of being put out of business by its low-cost
    rival, Dell During the phase of a merger deal between the two companies, Carly Fiorina and
    Michael Capellas were the CEOs of HP and Compaq, respectively For the merger to take
    place, lots of issues started cropping up and it was very important to address and solve
    issues relating to financial expectations, social responsibility, family legacy, competitive
    demands and strategic opportunities.

    WHAT ARE THE ADVANTAGES AND DISADVANTAGES ASSOCIATED WITH THESE STRATEGIES.

    - Expected Positives out of the HP-Compaq Merger


    - 1. Improved economics and innovation The combined entity would create great success
    through larger economies of scale. The operations as well the supply chain functions would
    create huge reductions in costs due to the entry of a direct sales channel with the merger.
    This creates a much more flexible distribution model for the new entity
    - 2. Complementary leadership in key markets The new merger would have the industry
    leading product line in the server category. It would also be the industry leader in enterprise
    storage segment and storage area networks. It would create a broader portfolio of products
    and services to the merged entity
    - 3. Strengthened business provides critical mass in key growth market 65000 IT architects in
    160 countries would create accelerated growth for the new merged entity. This would push
    the company to rely on greater customer loyalty and be the leader in mission-critical
    services and multivendor support
    - 4. Financial Benefits The estimated annual cost savings by 2004 was at around $ 2.5 billion.
    This would also allow HP to increase investment in the imaging and printing business .
    -
    - Expected Negatives out of the HP-Compaq Merger
    - 1. Fear of HP`s business portfolio turning out to be even worse With the merger with
    Compaq, HP would be having increased exposure in the unprofitable PC business. The PC
    market was expected to shrink and the dot-com bubble was in the burst phase at that point
    in time This study resource was shared via CourseHero.com
    - 2. The integration of the proposed merger was substantial In order to bring the two
    businesses together it required a lot of effort on the part of the new management team to
    integrate the activities, restructuring its distribution channels, creating a smooth transaction
    phase so that the employees would not be left out of the same too. This was one of the
    largest merger that was about to take place and no significant merger involving computer
    companies had ever met their expectations, for example, the acquisition of DEC by Compaq.
    The HP management team had no experience of a merger of such magnitude thereby
    making it a difficult process to initiate
    - 3. Negative financial impact on HP shareholders Once the merger was announced, it created
    a dramatic impact on the share price and it reduced the deal value by a substantial amount
    of $6 billion. A lot of Wall Street analysts and institutions predicted low estimates for future
    financial performance of the new entity
    - 4. Fear that HP`s strategic position would not materially improve Neither company, who
    were part of the deal, had a highly profitable PC business model and also neither company
    had successfully transitioned to a direct distribution model .

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