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Unformatted text preview: trategy of migrating to higher margin, less
c. Diluted interest in Imaging and Printing.
Acquisition will not solve HP’s strategic problems:
a. PC economics remain unattractive.
b. Combined entity remains “stuck in the middle” in servers – behind Dell at
the low end and Sun and IBM at the high end.
c. Services weighted heavily to lower margin support, not outsourcing and
d. HP+CPQ ≠ IBM.
Integration risk is substantial:
a. No precedent for success in big technology transactions.
b. Most acquisitions fail.
c. Integration difficulties are obvious.
d. Revenue risks offset cost synergies.
e. Very difficult to mesh cultures. Simon London, “Inside Track: Risks of Grabbing a Tiger by the Tail,” Financial Times, September 10, 2001.
Points from the “Report to the Trustees of the William R. Hewlett Revocable Trust on the Proposed Merger of HewlettPackard and Compaq,” p. 9. This document is authorized for use by Xiaolei Cong, from 11/30/2012 to 2/28/2013, in the course:
MGMT 237: 001 Management of Technology - Chaudhuri (Spring 2013), University of Pennsylvania.
Any unauthorized use or reproduction of this document is strictly prohibited. HP and Compaq Combined: In Search of Scale and Scope, SM-130 4. p. 10 Financial impact on HP shareholders is unattractive:
a. Relative contribution of earnings favors Compaq.
b. Weaker credit.
c. Increased equity risk and cost of capital. Fiorina and her executive team countered Hewlett’s objections every step of the way. Her team
rebutted Hewlett with five key points:17
5. Information technology industry continues to undergo rapid change and HP
must continue to address challenges of new environment.
Compaq merger is uniquely compelling strategic alternative— no other option
offers such comprehensive benefits and opportunities.
Combination addresses industry dynamics and customer requirements, creates
stronger company and is financially compelling.
Management is experienced and focused on execution, and integration
planning is ahead of schedule.
Walter Hewlett filings [such a...
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