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Unformatted text preview: aw, HP and Compaq had already launched a massive integration planning effort. Operating in
so-called “clean rooms,” apart from the thousands of employees working for HP and Compaq, a
relatively small and diverse group of HP and Compaq executives had been doing the planning
needed to launch the execution of the integration immediately after obtaining legal clearance.
More mergers fail than succeed, and technology mergers in particular are notoriously hard to pull
off.5 However, just two years after HP announced its intention to acquire Compaq, the company
met or exceeded its ambitious integration targets. Within the first nine months of the merger, HP
reported savings of nearly $3 billion from layoffs (12,000 out of 155,000 employees), reduction
in overlapping product lines, facilities closures and consolidation of its supply chains. The
savings exceeded HP’s announced goal of cutting $2.4 billion of expenses within 18 months of
This case describes the strategic analysis that went into identifying Compaq as an acquisition
target to help HP achieve its objective of becoming the leading technology company in the
world, the planning and execution of the merger, and the actual processes created to achieve the
strategic, administrative, and cultural integration of the two companies.
1999-2001: EXPLORING STRATEGIC ALTERNATIVES
A Failed Strategic Acquisition Attempt
Searching for a new, more services-oriented corporate strategy, Fiorina announced in September
2000 an $18 billion bid for the consulting arm of PriceWaterhouse Coopers (PwC). At that time,
HP’s Services Group accounted for about 1 percent of the market for IT services. The market
was huge, estimated to exceed $660 billion in 2000, and fragmented; Compaq also had an
estimated 1 percent of the market and IBM was the industry leader with 5 percent. The deal
would have transferred PwC’s 31,000-strong army of information system consultants to HP’s
small IT services group. HP’s goal was to garner a higher percentage of its revenue from high
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This document was uploaded on 02/16/2014 for the course MGMT 237 at UPenn.
- Spring '14