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HP_and_Compaq_Combined__In_Search_of_Scale_and_Scope - CASE...

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C ASE : SM-130 D ATE : 07/15/04 ( R EV . 2/3/06) Professor Robert A. Burgelman and Philip E. Meza prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This case can be used in conjunction with The New HP in 2004 (A): Leading Strategic Integration, SM-125A, The New New HP in 2004 (B): Winning in the Core Business, SM-125B, The New HP Way, SM-72, HP, Compaq and the PC Landscape in 2001, SM-72B, all by Burgelman and Meza. Copyright © 2004 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: [email protected] or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. HP AND C OMPAQ C OMBINED : I N S EARCH OF S CALE AND S COPE I’m going to overgun this thing. 1 —Carleton “Carly” S. Fiorina, Chairman and CEO, Hewlett-Packard I NTRODUCTION A merger as big and bold as Hewlett-Packard’s $19 billion acquisition of Compaq Computer in 2002 had never taken place before in the technology industry. HP’s CEO, Carly Fiorina, called it an “historic” event. 2 To many critics, however, the merger seemed doomed to fail. Whatever their opinion of the strategic rationale, many observers thought that HP would not be able to successfully integrate its former rival. An embattled competitor described it as a “slow motion collision of two garbage trucks.” 3 Even HP’s head of human resources compared mergers in general to icebergs where the real work takes place below the surface. 4 The merger would produce one very large iceberg; perhaps big enough to sink competitors, or break up under the stress of internal and external forces. Nevertheless, Fiorina believed it was the right move for HP, and a key element in her strategic objective to make HP, in her words, “the leading technology company in the world.” Winning shareholder approval for the merger proved to be a tough fight for Fiorina and her senior executive team. Compaq’s shareholders were willing enough to swap their stock for HP shares, but HP’s shareholders proved harder to convince. Announced on Labor Day 2001, it was clear from the outset that the deal would lead to the elimination of at least 15,000 jobs. That was one of the reasons that Walter Hewlett, HP board member and son of the company’s co-founder 1 All quotes from Carleton S. “Carly” Fiorina are from the authors’ interview on September 26, 2003 unless otherwise cited.
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