Compaq merges with Hewlett-Packard
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Hewlett-Packard and Compaq have announced that they are to merge, as the result of a 25 billion dollar deal. HP shareholders will own 64% of the merged company. Carly Fiorina, the CEO of Hewlett Packard, will assume the role of CEO and chairman for the new company, while Michael Capellas, CEO of Compaq, will become president.

The new company should take the top position among computer hardware suppliers, ranging from printers, PCs, and Unix servers. It is estimated that the companies' combined revenues will reach $87bn. They will also operate in over 160 countries and jointly employ over 145,000 staff.

Michael Capellas explained to the Compaq staff the reasons behind the merger:

"We have made significant progress in establishing Compaq as an enterprise company. We get more than 50% of our revenue from our server, storage and services business. Our fastest growing businesses have been industry standard servers, enterprise storage and services. And we're winning major enterprise business across the world.

But we have two significant gaps in our portfolio that make it difficult for us to be truly recognized as a major player in the enterprise. One is a leadership position in data center UNIX. On the plus side, we're competitive in some key segments of the UNIX market. Tru64 UNIX is a technical leader, and we've been gaining market share. But our overall position is not broad enough, particularly in the data center.

HP, on the other hand, is No. 2 in the UNIX market and an acknowledged leader in the data center. Together, we will close the gap with the current market leader, Sun, and create new opportunities to grow our UNIX business.

The second key ingredient we are missing is a leading set of open application integration tools to support interoperability. HP's OpenView software suite is an industry leader for Internet-based system and network management and interoperability. That is a vital part of our ability to integrate solutions across the enterprise.

By merging with HP we are closing those gaps - and HP closes some gaps of its own, including its competitive positions in industry standard servers and commercial PCs.

There's a third important element as well. We will achieve a critical mass in services. Together we will have a $15 billion services business - the third largest in the IT industry. We will have significant strength in customer support, outsourcing, system and network integration, and vertical markets. This will make us an even more competitive solutions company with a unique value proposition for our customers."

Fiorina, HP CEO, commented on the merger: "This is a decisive move that accelerates our strategy and positions us to win by offering even greater value to our customers and partners. In addition to the clear strategic benefits of combining two highly complementary organizations and product families, we can create substantial shareowner value through significant cost structure improvements and access to new growth opportunities. At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners—together we will shape the industry for years to come."

Capellas said, "We are creating a new kind of industry leader—one founded on customer success, world-class engineering, and best of breed products and services. In sharp contrast to our competitors, we are committed to leading the industry to open, market-unifying architectures and interoperability, which reduce complexity and cost for our customers. With this move, we will change the basis of competition in the industry."


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