Submitted by:

Abhai Solanki (X002-18)

Anurag Srivastava (X007-18)

Avnish Kumar (X010-18)

Suprabha Kumari (X020-18)

Synopsis of The HP-Compaq Merger: A battle for the Heart & Soul of a Company (A)

The case gives an overview of the merger between two leading players in the global computer industry - Hewlett -
Packard Company (HP) and Compaq Computer Corporation (Compaq). The case explores the reasons for HP's
failure to realize the synergies identified prior to the merger. It highlights that the leadership, legacy and cultural
issues play an important role in mergers. The case describes in detail the rationale for HP -Compaq merger,
problems faced in integrating the merged entities and whether the merger made business and economic sense. It
also describes the product profile of the merged entity and how the new HP compares with its major competitors,
IBM and Dell Computers.

Finally, the case presents the challenges faced by the new CEO of HP, Mark Hurd, in mid -2005. The case is
designed to help students critically analyze a merger deal and understand the various issues involved such as
product synergies, cost savings and technological compatibility. The case also provides an insight into the possible
hurdles that might crop up while implementing a mega - merger.

Strategic Analysis of the Case

Positive Aspects

A CEO will always consider such a merger to be an occasion to take a competitive advantage over its rivals like IBM
as in this case and also be of some interest to the shareholders as well. The following are the strategies that are
related to this merger between HP and Compaq:

* Having an eye over shareholders' value: If one sees this merger from the eyes of Fiorina, it would be certain that
the shareholders have a lot to gain from it. The reason for the same is the increment in the control of the market.
So, even of the conditions were not suitable from the financial perspective, this truth would certainly make a lot of
profits for the company in the future.

* Development of Markets: Two organizations get involved in mergers as they want to expand their market both
on the domestic and the international level. Integration with a domestic company doesn't need much effort but
when a company merges internationally as in this case, a challenging task is on head. A thorough situation
scanning is significant before putting your feet in International arena. Here, the competitor for HP was Compaq to
a large degree, so this merger certainly required a lot of thinking. Organizations merge with the international
companies in order to set up their brands first and let people know about what they are capable of and also what
they eye in the future. This is the reason that after this merger the products of Compaq would also have the logo
of HP. Once the market is well-known, then HP would not have to suffer the branding created by Compaq. They
would be able to draw all the customers of Compaq as well.

* Propagated Efficiencies: Any company by acquiring another or by merging makes an attempt to add to its
efficiencies by increasing the operations and also having control over it to the maximum extent. We can see that
HP would now have an increased set of employees. The only factor is that they would have to be controlled
properly as they are of different organizational cultures. (Benefits of Mergers:, 2010)

* Allowances to use more resources: An improvised organization of monetary resources, intellectual capital and
raw materials offers a competitive advantage to the companies. When such companies merge, many of the
intellects come together and work towards a common mission to excel with financial profits to the company. Here,
one can't deny the fact that even the top brains of Compaq would be taking part in forming the strategies of the
company in the future.

* Management of risks: If we particularly take an example of this case, HP and Compaq entering into this merger
can decrease the risk level they would have diversified business opportunities. The options for making choice of
the supply chain also increase. Now even though HP is a pioneer in inkjet orienting, it would not have to use the
Product based Facility layout which is more expensive. It can manage the risk of taking process based facility layout
and make things cheaper. Manufacturing and Processing can now be done in various nations according to the cost
viability as the major issue.

* Listing potential: Even though Wall Street and all the investors of the company are against the merger, when
IPOs are offered, a development will definitely be there because of the flourishing earnings and turnover value
which HP would be making with this merger.

* Necessary political regulations: When organizations take a leap into other nations, they need to consider the
different regulations in that country which administer the policies of the place. As HP is already a pioneer in all the
countries that Compaq used to do its business, this would not be of much difficulty for the company. The company
would only need to make certain minor regulations with the political parties of some countries where Compaq was
flourishing more than HP.

* Better Opportunities: When companies merge with another company, later they can put up for sale as per as the
needs of the company. This could also be done partially. If HP feels that it would not need much of warehouse
space it can sell the same at increased profits. It depends on whether the company would now be regarded a s a
make to stock or a make to order company.

* Extra products, services, and facilities: Services get copyrights which enhances the level of trade. Additional
Warehouse services and distribution channels offer business values. Here HP can use all such values integrated
with Compaq so as to increase its prospects. (Berry, 2010)

Negative Aspects

There are a number of mergers and acquisitions that fail before they actually start to function. In the critical phase
of implementation itself, the companies come to know that it would not be beneficial if they continue as a merger.
This can occur in this merger between HP and Compaq due to the following reasons.
Conversations are not implemented: Because of unlike cultures, ambitions and risk profiles; many of the deals are
cancelled. As per as the reactions of the owners of HP, this seems to be extremely likely. So, motivation amongst
the employees is an extremely important consideration in this case. This requires an extra effort by the CEO,
Fiorina. This could also help her maintain her position in the company.

Legal Contemplations: Anti-competitive deals are often limited by the rules presiding over the competition rules in
a country. This leads to out of order functioning of one company and they try to separate from each other. A lot of
unnecessary marketing failures get attached to these conditions. If this happens in this case, then all that money
which went in publicizing the venture would go to be a waste. Moreover, even more would be required to re-
promote as a single entity. Even the packaging where the entire inventory from Compaq had the logo of HP would
have to be re-done, thus hampering the finance even further. (Broc Romanek, 2002)

Compatibility problems: Every company runs on different platforms and ideas. Compatibility problems often occur
because of synchronization issues. In IT companies such as HP and Compaq, many problems can take place
because both the companies have worked on different strategies in the past. Now, it might not seem necessary for
the HP management to make changes as per as those from Compaq. Thus such problems have become of greatest
concern these days.

Fiscal catastrophes: Both the companies after signing an agreement hope to have some return on the money they
have put in to make this merger happen and also desire profitability and turnovers. If due to any reason, they are
not able to attain that position, then they develop a abhorrence sense towards each other and also start charging
each other for the failure.

Human Resource Differences: Problems as a result of cultural dissimilarities, hospitality and hostility issues, and
also other behavior related issues can take apart the origin of the merger.

Lack of Determination: When organizations involve, they have plans in their minds, they have a vision set; but
because of a variety of problems as mentioned above, development of the combined company to accomplish its
mission is delayed. Merged companies set the goal and when the goal is not accomplished due to some faults of
any of the two; then both of them develop a certain degree of hatred for each other. Also clashes can occur
because of bias reactions. (William, 2008)

Risk management failure: Companies that are involved in mergers and acquisitions, become over confident that
they are going to make a profit out of this decision. This can be seen as with Fiorina. In fact she can fight the whole
world for that. When their self-confidence turns out into over-confidence then they fail. Adequate risk
management methods should be adopted which would take care of the effects if the decision takes a downturn.
These risk policies should rule fiscal, productions, marketing, manufacturing, and inventory and HR risks associated
with the merger.