Word: compaq
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Dates: during 2000-2009
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Since founding Dell Computer in his Texas dorm room in 1984, Michael Dell has steadily, inexorably grown his company into the largest PC manufacturer in the world. The firm, based in Austin, Texas, has overtaken the box business's best-known makers-IBM, Compaq, Hewlett-Packard among them-by executing its unorthodox, build-to-order manufacturing formula. Dell Computer isn't known for product innovation. It wins by being efficient, relentlessly so. In the competitive and increasingly commoditized computer industry, Dell's cherub-faced founder and CEO may be the closest thing there is to an irresistible force...
...there's clearly a change in investors' willingness to view the merits of the deal," says Joel Wagon-feld, research analyst at Banc of America Securities, which had previously been skeptical of the merger. Indeed, the gap between what HP wants to pay for Compaq shares and how the market values them--a key measure of merger confidence, called the arbitrage spread--has narrowed from a toxic $4.35 in November to $1.70. In another tacit sign of support, the company's top five shareholders have been quietly adding to their stake...
...taken internal polls shows just how dicey things were.) And Hewlett's fellow board members have been increasingly eager to point out that Fiorina is not riding roughshod over them. "It's unfair to say this is Carly's deal," says Bob Knowling, a former CEO of Covad. "Compaq just makes a tremendous amount of sense. Two plus two can equal five...
...Fiorina bristles at the suggestion that HP doesn't innovate enough (indeed, the company recently introduced the first photo printer that prints directly from a digital camera's storage card). She slams Hewlett's alternative as a waste of opportunity. Roughly 25% of the profit a combined HP-Compaq would make, in the best-case scenario, would come from printing and imaging. "It would be an easy course if we were focused on the short term," she says. "We're looking 10 years ahead...
...course, that sidesteps the question of whether HP and Compaq can successfully merge without leaving the floor slick with blood. Most large-scale tech-firm mergers have been hideous disasters. Compaq's last acquisition, the Digital Equipment Corp., was a textbook example of how not to do it. Good products died, top talent fled and resentment lingered for years after management cut 15,000 jobs. Now HP plans, upon the merger, to lay off 15,000; it also hopes for cost savings of $2.5 billion. A team of 500 is working full time on integrating the companies, though most...