Hp Compaq
Question 1
Using a SWOT analysis, identify the key strategic fits between the two companies. What are the most important expected synergies?
Strength Weakness
Ability to serve customers at lower cost
Compaq was a significant player in enterprise systems and HP in IT services business
Wider spectrum of products for its clients through the merger
Strong brand recognition, something that takes time to build
Highly complimentary R&D Overlapping management
Overlapping product lines
Diluted interests in imaging and printing which were traditionally HP’s strengths
Opportunity Threat
The next IBM? (HP was looking to expand its services business through both organic and inorganic channels)
Compaq was the market leader in fault-tolerant computing and industry standard servers . HP did not have a presence in the former and its position was weak in the latter
Economies of Scale and Scope
Innovation
Market share Competitive environment
Decreasing margins in the PC industry from fierce competition
Maturing products
Diluting high margin business (e.g. printing and imaging)
Employee morale
Organisational culture conflicts
Server market competitors (e.g. IBM, Dell) eroding market share
HP offers a comprehensive range of products and services, as a merged firm it can generate synergies by increasing its portfolio of hardware and software integrated products at a lower cost . In another words, the merger would create a full service technology firm capable of setting up complex networks.
Whole point of focusing on ‘cost cutting’ was that it is easier than future revenues to quantify. They didn’t focus on economies of scope but rather on layoffs, etc. (figure 1 page 7, Revenue enhancement synergy is not quantified only the cost synergies ).
The value of synergies (from exhibit 9) net of revenue loss impact was expected to be at $5-9 per share of the combined company.
Question 2
Examine the key assumptions
Using a SWOT analysis, identify the key strategic fits between the two companies. What are the most important expected synergies?
Strength Weakness
Ability to serve customers at lower cost
Compaq was a significant player in enterprise systems and HP in IT services business
Wider spectrum of products for its clients through the merger
Strong brand recognition, something that takes time to build
Highly complimentary R&D Overlapping management
Overlapping product lines
Diluted interests in imaging and printing which were traditionally HP’s strengths
Opportunity Threat
The next IBM? (HP was looking to expand its services business through both organic and inorganic channels)
Compaq was the market leader in fault-tolerant computing and industry standard servers . HP did not have a presence in the former and its position was weak in the latter
Economies of Scale and Scope
Innovation
Market share Competitive environment
Decreasing margins in the PC industry from fierce competition
Maturing products
Diluting high margin business (e.g. printing and imaging)
Employee morale
Organisational culture conflicts
Server market competitors (e.g. IBM, Dell) eroding market share
HP offers a comprehensive range of products and services, as a merged firm it can generate synergies by increasing its portfolio of hardware and software integrated products at a lower cost . In another words, the merger would create a full service technology firm capable of setting up complex networks.
Whole point of focusing on ‘cost cutting’ was that it is easier than future revenues to quantify. They didn’t focus on economies of scope but rather on layoffs, etc. (figure 1 page 7, Revenue enhancement synergy is not quantified only the cost synergies ).
The value of synergies (from exhibit 9) net of revenue loss impact was expected to be at $5-9 per share of the combined company.
Question 2
Examine the key assumptions