Coup de theatre in IT world: Hewlett-Packard buys Compaq

On Monday, when the United States were celebrating Labor Day, a company born in a garage back in 1939 got its hands on another, which made its debut in the ’80s, launching the first PC ever produced by someone other than IBM.

It is about Hewlett-Packard and Compaq, which, after secret negotiations, announced the biggest merger of the industry. Starting yesterday, every player on the high-tech market was forced to do their sums and strategies again, because international hierarchy in the field will undergo major changes.

HP, deemed as number two in the personal computers industry by the experts, will absorb Compaq in a $25bn deal. The transactions will be conducted by swapping stock and will bring on the market the world’s largest computer, server and printer producer.

“This is a decisive move that accelerates our strategy and positions us to win by offering even greater value to our customers and partners,” said the legendary Carly Fiorina, chairman and chief executive of Hewlett-Packard.

On the other hand, Michael Capellas, Compaq Chairman and CEO announces,” with this move, we will change the basis of competition in the industry.”

The IT world’s newest giant will be known as Hewlett-Packard and will make approximately $87bn in annual turnover, similar to the IBM giant ($88.4bn) but dwarfing its competitors Dell or Sun Microsystems ($15bn each). The combined companies will have operations in more than 160 countries and will employ more than 145,000 workers.

Compaq shareholders will receive 0.6325 of newly issued HP shares for each share of Compaq. HP shareholders will own 64 percent and Compaq shareholders will own 36 percent of the combined company.

The combined entity will be based in Palo Alto, California, HP’s hometown, and retain a “significant presence” in Houston, where Compaq is headquartered.

Both HP and Compaq Computer management are hoping to see the deal finalised in the first half of 2002, but they have one more obstacle to overcome: the unanimous approval of the shareholders and of the American anti-trust authorities.

HP made $48.8bn turnover in the fiscal year 2000, while Compaq Computer registered $42.38 in total revenues during the same period, according to Fortune 500.

Carly Fiorina will become the new company’s chairman and CEO, while Michael Capellas will become president of the new entity. Capellas and four other Compaq board members will join HP’s board.

Analysts say the consolidation on the international computer market will go on. Andrew Neff, Bear Stearns analyst, estimates a possible Gateway sell-out to Dell.