HP To Swallow Compaq For $25 Billion

HP To Swallow Compaq For $25 Billion – Update

Adam Creed

Two leading computer manufacturers, Hewlett-Packard Company [NYSE:HWP] and Compaq Computer Corp. [NYSE:CPQ], say they plan to merge, forming the world’s largest PC maker comprising four units so big that each would be among the biggest IT companies in the business.

If the merger plan clears antitrust reviews that are likely in the coming months, the new company would be divided into four separate units. Already today, the European Commission said it planned to investigate the merger.

“Each of these four units would be a top-10 IT company in its own right,” HP chairman and CEO Carly Fiorina said in a conference call with analysts today. Under terms of the merger, Fiorina would be chairman and CEO, and Compaq chief Michael Capellas would serve as president.

“I think Michael and I will build a great partnership,” she said.

The merger is the “next logical step” in the organizational structures that both companies had in place, she said.

One of deal’s chief benefits is the cost-savings that a merged entity could realize – up to $2 billion in the first year is being targeted.

Details of the agreement call for Compaq shareholders to get .6325 of a newly issued HP share for each of their shares.

The new company will be called HP and based in Palo Alto, Calif. The four business units would encompass imaging and printing, access devices, IT Infrastructure, and services. Compaq recently lost its status as the world’s No. 1 PC manufacturer to Dell Computer Corp., a position the new HP will now hold.

Expected job cuts were not disclosed. The new company would have 145,000 employees at the close of the deal.

“Clearly, the potential of this combination is compelling, but we understand the magnitude of the challenge and the need for discipline and speed,” said Fiorina. “We’re helped by the fact that both companies have been pursuing similar organizational structures and sales force models, and there is immense talent resident in both organizations.”

Reported By Newsbytes.com, http://www.newsbytes.com .

08:57 CST Reposted 08:58 CST

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