Transcript Hewlett-Packard Compaq Merger

Hewlett-Packard Compaq
Merger
Business Decision Making
Spring 2005
What We Hoped to Learn
• Basic M&A criteria
• How the AHP process really works
• What happened with HP & Compaq and
how can we make it better in the future?
Outline
I.
Organizational Structure
II.
III.
IV.
V.
VI.
Introduction
Criteria
Alternatives
Hierarchy
Conclusion
Organizational Structure
COORDINATOR
Shannon Caputo
ALTERNATIVES
Steve Piskadlo
Paul Ferraro
Shawn Standen
CRITERIA
Phil Laspisa
Kathleen Cardelli
Chris Skorski
Cassie Knox
EXPERTS
WRITERS
Evan Taylor Melissa Shah
-Presentations Jonathan Lai
Chris Skorski
-Expert Choice
DOMAIN EXPERTS:
Dr. Stephen Andriole
Professor John Toppel
Outline
I.
Organizational Structure
II. Introduction
III.
IV.
V.
VI.
Criteria
Alternatives
Hierarchy
Conclusion
Introduction to HP
• Well-respected systems vendor
• Smaller, but worthy competitor to IBM
• Competes mainly in the hardware
business with desktops and servers
• Lacking in the services business
• Undisputed leader with its line of PC
printers
Introduction to Compaq
• Compaq sales leveled off with added
competition from Dell
• Compaq was best known for its personal
computer offerings
• After paying $5.4 billion to finance a
merger with Digital Equipment, Compaq
eliminated overlap by cutting thousands of
jobs worldwide
Carly Fiorina:
C.E.O. of Hewlett-Packard
Mike Capellas:
C.E.O. of Compaq
Why Merge?
• To compete with IBM and other companies
• The combined services business will have
65,000 services professionals vs. 100,000plus for IBM
• Reduce Costs
• Bolster stock
Merger Dates
• September 4, 2001 - HP and Compaq
announced a definitive merger agreement
to create an $87 billion global technology
leader.
• Eights months later on May 3, 2002 HP
and Compaq officially merge.
What HP Has to Say on Why
•
•
Because in one strategic move, we will become market leaders in servers, in storage
and in management software -- the essentials of business infrastructure, where
leadership really counts.
Because we will greatly strengthen our depth and breadth of technology solutions at a
time when customers demand integrated, end-to-end solutions.
• Because more inventors and engineers will be
focused on solving the toughest technology
challenges of our times -- together.
•
•
Because combined we will lead the march toward open standards more effectively
than either company could on its own.
Because for our employees, customers and shareowners, we will be a stronger, more
vibrant HP, better conformed to lead and grow under market conditions that will
demand unprecedented integration, breadth and flexibility.
• Because in our industry, to stand still is to fall
behind.
Outline
I.
II.
Organizational Structure
Introduction
III. Criteria
IV. Alternatives
V. Hierarchy
VI. Conclusion
Main Criteria
• Ability to Improve
Financial Performance
• Ability to Evolve
Company
• Ability to Integrate
Ability to Improve Financial Conditions
Ability to Evolve Company
Ability to Integrate
Treeview
Financial Implications
Goal: Should HP and Compaq Merge?
Ability to Improve Financial Conditions (L: .460 G: .460)
Ability to Decrease Costs (L: .643 G: .296)
Ability to Increase Sales (L: .357 G: .164)
PC Technology (L: .422 G: .069)
Server Technology (L: .228 G: .038)
Service Technology (L: .210 G: .034)
Printer Technology (L: .140 G: .023)
Ability to Evolve Company (L: .358 G: .358)
Server Technology (L: .228 G: .038)
Ability
Evolve
Company
G: .034)
(L: .210
Technology
Serviceto
Printer Technology (L: .140 G: .023)
Ability to Evolve Company (L: .358 G: .358)
Increase Intellectual Property (L: .600 G: .215)
Improving Brand Value (L: .400 G: .143)
Image (L: .396 G: .057)
Awareness (L: .366 G: .052)
Loyalty (L: .238 G: .034)
Ability to Integrate (L: .182 G: .182)
Improving Brand Value (L: .400 G: .143)
Image (L: .396 G: .057)
Ability to Integrate
Awareness (L: .366 G: .052)
Loyalty (L: .238 G: .034)
Ability to Integrate (L: .182 G: .182)
Human Capital Management (L: .364 G: .066)
Employees/Culture (L: .667 G: .044)
Channel Partners (L: .333 G: .022)
Company Organizational Structure (L: .251 G: .046)
Resources (L: .222 G: .040)
Technology (L: .337 G: .014)
Marketing (Brand) (L: .268 G: .011)
IT Infrastructure (L: .235 G: .009)
Relationships with Customers & Suppliers (L: .161 G: .007)
Future Planning (L: .163 G: .030)
Strategy (L: .750 G: .022)
Tactics (L: .250 G: .007)
Outline
I. Organizational Structure
II. Introduction
III. Criteria
IV. Alternatives
V. Hierarchy
VI. Conclusion
Alternatives
• Should they Merge?
• Should they Not Merge?
YES
NO
Outline
I.
II.
III.
IV.
Organizational Structure
Introduction
Criteria
Alternatives
V. Hierarchy
VI. Conclusion
Expert Choice
Outline
I.
II.
III.
IV.
V.
Organizational Structure
Introduction
Criteria
Alternatives
Hierarchy
VI. Analysis & Recommendations
VII. Conclusion
Results
NO
53.4%
70.0%
YES
46.6%
60.0%
50.0%
Based on the M&A
criteria recommended
by our domain
experts, HP and
Compaq should not
have merged
40.0%
30.0%
20.0%
10.0%
0.0%
No
Yes
Sensitivity Analysis
To change the final outcome…
• Ability to Improve Financial Performance must
increase from 46.6 to 55.7 or a 19.5% change
• Ability to Evolve Company must decrease from
35.8 to 27.8 or a -22.3% change
• Ability to Integrate does not affect the decision
Overall, the final answer is not very sensitive to
any of the criteria
Outline
I.
II.
III.
IV.
V.
VI.
Organizational Structure
Introduction
Criteria
Alternatives
Hierarchy
Analysis & Recommendations
VII. Conclusion
What Happened?
• They did manage to save $3 billion with
the merger, successfully accomplishing
their main goal of reducing costs of $2.1
billion
• However, that came at the price of firing
44,000 employees over the last 3 years
– Original estimate: 15,000-17,000
Conclusions
Based on the criteria
the HP and Compaq
merger should not
have gone through.
Problems with
integration as well as
evolving the company
can be forecasted
through the AHP
process we have
shown here today.
Mark Hurd: HP’s New C.E.O.
Mark Hurd, a former president at NCR corporation,
where he spent 25 years; was appointed C.E.O. and
president of Hewlett-Packard on March 29, 2005.
Thank You!
Questions?