m
 

 
 
 

PRESENTED BY
R Sumit kanade 09-731
R Advait Malvankar 09-739

R Aditya Khandale 09-730

R Swapneel Khavare 09-732

ð
m STOR
EVENT
R A merger as big and bold as mewlett-Packard·s $
25 billion acquisition of
ompaq
omputer in
2002 had never taken place before in Technology
ndustry.

R
arly Fiorina ,mP·s
EO, believed it was the

right move for mP

R £ The leading technology company in the world

r
mP
R William (Bill) mewlett and David (Dave) Packard
originated a company in a garage in nearby Palo
Alto,california
R 1939, Packard and mewlett established mewlett-
Packard (mP) in Packard's garage with an initial
capital investment of US$538.
R Kickstarted the silicon valley·s progress

[
PREMERGER POS T ON OF mP-2000
R Ranked 13th in fortune 500
R Turnover US $48.8 bn

R 85500 employees

R
arly fiorina:
hairman (September 22)

R 2nd largest computer manufacturer

R leader in Desktop computers, Servers, Peripherals &

services.
R nternet infrastructure,high-end Super dome server
line in September.


mP-2001
R March: a new business unit, mP Services,
reporting directly to the
EO
R May: systems and services based on the new
tanium processor jointly developed by mP and
ntel.
R ndustry stumbled, meeting growth targets
became difficult.

Î
mP-PRODU
T PORTFOL O
R Laptops/Notebooks
R Palmtops/PDA

R Printers & printing consumables

R Digicams

R Scanners

R Moniters

R Mainframes



OMPAQ
R Joseph R.
anion,Jim marris & Bill Murto in
Feb 1982
R nitial investment $1.5mn.

R Manufactured & sold BM compatible computers

-

OMPAQ-PRODU
T PORTFOL O
R Enterprise computing group
R Mainframes servers workstations

R nternet products networking products

R
ommercial desktops

R Portables

R Small and medium business solutions

˜
mURDLES FOR mP
R Overall industry struggling
R Adapting to the innovations

R
ompetition in printing

R PG business not gaining traction

R Shrinking margins


 WmY MERGE??

R Eliminate one player in an oversupplied P
Market

R To compete with BM and other companies

R Reduce
osts.

R 1990·s T recessionary phase.

R Merger expected to yield savings projected to reach $2.5bn

annually by 2004.
R Advantage of more volume of sales.

R Development of direct distribution capability.

R Strengthen sales force .

R mprove customer base


WmY
OMPAQ??
R No 2 in the P
business and stronger on the
commercial side than mP. mP was stronger on
the
consumer side. Together they would be No 1 in
market share in 2001 .
R
ompaq was strong in low-end industry standard
( ntel) servers.
R Best known for its P
s, also had enterprise
businesses that it had built up through earlier
acquisitions of its own.

ð
EXPE
TED RESULTS
R Superior customer value
R Generate cost synergies reaching approximately
$2.5 bn annually.
R Adds up to world-class innovation and quality.

R Larger P
position resulting from the merger

likely to increase risk and dilute shareholders
interest

r

ONT NUED..

R Assets of $56.4 billion

R annual revenues of $87.4 billion

R annual operating earnings of $3.9 billion

R operations in 162 countries and 145000

employees
R mproves access to the market with
ompaq·s
direct capability and low cost structure .
R Work force reduction by around 15,000 employees
saving around $1.5 billion per year .

[
ROLE OF F OR NA N MERGER
R nitiative taken for the merger.
R More expectations from the merger.

R Relied on institutional shareholders vote in

favour of deal.
R nspite of oppositions, went ahead with the
merger.


PROBLEM DUR NG TmE DEAL

R Opposition
-Walter mewlett
-The largest shareholder ² The David & Lucile
Packard Foundation(10.4%)
-Employees

R Negative Reaction of Stock Market

- Pair lost US$ 13bn in market cap
- n contrast,stock prices of their competitors
increased. Î
TERMS AND
OND T ONS
R mP will retain its name
R Fiorina will be the
EO and
hairman

R
apellas then
EO
ompaq will be the president

R 0.6325 of an mP share per
ompaq share

R Deal size Approx. $25 billion

R mP shareholders 64%;
ompaq shareholders 36%


KEY m GmL GmTS

R morizontal merger.

R Merger initiated on Sept 2001, completed on May

2002(8 month process).

R Biggest merger in T history.

R $25bn all stock purchase.

R 1mn working hours spent on merge.

R mPQ is the new stock symbol for the new mP

-

R T
SM

R ´Strategic blunderµ.

R ´Dumbest deal of the decadeµ ² Michael Dell

R ´One bad P
business merged with another bad

P
business does not make a good P
companyµ

R ´This is not a case of 1 + 1 = 3. More

like 1+1=1.5µ

˜
Œ mŒ

1. Resulting Business Portfolio is worse than the

existing mP Portfolio

2. Acquisition will not solve mP·s strategic

problems

3. ntegration risk is substantial

4. Financial impact on mP shareholders is

unattractive

ð
F OR NAS REPLY
1. nformation technology industry continues to
undergo rapid change an mP must continue to
address challenges of new environment

2.
ompaq merger is unique compelling strategic

alternative no other option offers such
comprehensive benefits and opportunities
3.
ombination addresses industry dynamics and
customer requirements, creates stronger
company and is financially compelling

4. Management is experienced and focused on

execution, and integration planning is ahead of
schedule. ð

ULTURAL D FFEREN
ES
m 

R mP saw itself, and the R
ompaq saw itself,

evidence supported
that view, as a culture
of consideration,
thoughtfulness, and
planning ² a more
careful culture.
more as a culture of
´ready, shoot ,aimµ
- much quicker to act
- debated less
- considered less
before took action

ðð
ALLEGED ROLE OF DEUTS
mE BANK
R Proxy war
R Merger was approved with narrow margins

R t was disclosed mP had ties with Deutsche

bank·s investment banking branch
R mP agreed to pay $1 mn and another 1 mn as
contingency
R US SE
charged Deutsche bank with failing to
disclose material conflict of interest
R Deutsche bank was imposed $ 750000 penalty

R Deutsche bank consented without admitting or

denying the findings ðr
NTEGRAT ON

R New leadership

ð[

 


  




  

 
   

  

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ð
FY 2002-03
R mproved position in every category in which they
compete.
R Became a leader in customer support services.
R Leader in PG, through commitment to innovation in
product design, manufacturing and business models.
R Being a technology company, the introduction of the
word ¶invent· in their logo.
R n the last 6 mths of fiscal 2002, introduced more
than 100 products & 1400 patents to their portfolio
R yr 2002 solid balance sheet with more than $11 bn in
cash & short term investments.
R The acquisition of
ompaq·s commercial pc &
consumer pc business allowed improvement in their
position in this category.
R Reduced their workforce through combination of ðÎ
layoffs, early retirements & attrition
SYNERGY
R
ost leadership
R Raw material costs reduced by 3-4%

R Strong growth

R Merging technology bases

R Adoption of direct selling approach of
ompaq

R Downsizing

ð
OVER
OM NG TmE FA LURE..
R Fiorina resigned 2005.
R New
EO: Mark murd
R Where Fiorina failed and where murd excels :
Educating mP managers and employees.
Exploiting the possibilities of the merger
Took initiatives to cut down costs, lay off employees
R Understanding the market properly and aligning mP·s
corporate strategy to reality.
R
reating a performance oriented culture to pursue common
goals shared throughout the organization
R Fiorina wanted to imitate BM services, which was service
focussed and mP was product focussed. ð-
SALES AND EXPENSES

ð˜
SELL NG AND GEN EXPENSE RAT O

r
PROF TS V/S DELL
OMPUTERS

r
EPS

rð

ON
LUS ON

R The merger suffered from autocratic leadership

and initial financial stress
R Successful integration is the key

R Operational integration and strategic integration

both should take place simultaneously
R Over the time the synergy strategy gives fruitful
results
R The benefits of economies of scale and scope can
be exploited in T industry .

rr
Thank You

r[