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Operating in so called clean rooms apart from the

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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 the merger.6 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 margin services...
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