By Leslie Shedd, CARLY for America Press Secretary
UPDATED: November 9, 2015
With the economic recession of 2001 still crippling the tech industry, Carly realized that HP’s potential was not being met. After careful consideration, extensive negotiations, and detailed planning, the HP Board of Directors, including Walter Hewlett, voted unanimously to merge with computer company Compaq. There were two companies that were struggling because of the terrible economic conditions after the tech bubble burst. But, Carly understood that together, the two companies had the strength to grow and thrive.
And Carly was proven right. The Compaq merger revitalized HP, making it “the world’s largest PC maker in terms of units sold” by 2007. After the merger, HP became the first $100 billion information technology company – even surpassing IBM – and had a “commanding presence in the PC and server markets and allowed it to become a one-stop shop for many companies’ computing needs.”
While others were looking at the next day or the next quarter, Carly had the vision to see 100 yards down the field and know that a transformative change would be necessary in order to save the company. And her vision set the stage for a slew of mergers in Silicon Valley as other companies realized that Carly Fiorina was right – consolidation was necessary in order to survive.
BACKGROUND INFORMATION
The Compaq/HP Merger Was Approved Unanimously By The Boards Of Both Companies. “Hewlett-Packard Company and Compaq Computer Corporation announced today a definitive merger agreement to create an $87 billion global technology leader. … Under the terms of the agreement, unanimously approved by both Boards of Directors, Compaq shareowners will receive 0.6325 of a newly issued HP share for each share of Compaq, giving the merger a current value of approximately $25 billion. HP shareowners will own approximately 64% and Compaq shareowners 36% of the merged company. The transaction, which is expected to be tax-free to shareowners of both companies for U.S. federal income tax purposes, will be accounted for as a purchase.” (HP, “Hewlett-Packard And Compaq Agree To Merge, Creating $87 Billion Global Technology Leader,” Press Release, 9/3/01)
HP’s Server Segment, Created By The Compaq Merger Is One Of The Only Profitable Aspect Of HP Currently. “Hewlett-Packard Co.’s fiscal third quarter earnings showed a decline in nearly all of its businesses, with one exception: industry standard servers, a segment area that grew in part as a result of H-P’s much-maligned merger with Compaq Computer in 2002…The PC and printer weakness is also why H-P is trying to position the enterprise company as the better stock for investors, and Fiorina’s server legacy could be a big part of its enterprise effort. (Therese Poletti, “HP’s Only True Growth Is a Carly Fiorina Legacy,” Market Watch, 8/20/15)
The Compaq Merger Gave HP A “Commanding Presence In The PC And Server Markets And Allowed It To Become A One-Stop Shop For Many Companies’ Computing Needs.” “As it turned out, the acquisition has paid off handsomely. Several analysts say it has given the company a commanding presence in the PC and server markets and allowed it to become a one-stop shop for many companies’ computing needs. HP has since overtaken Dell as the top PC seller and become the world’s biggest technology company by revenue, which reached $115 billion in 2009.” (Mike Zapler, “Analysts: Carly Fiorina Long On Vision, Fell Short On Execution At HP,” Mercury News, 4/20/10)
HP Has “Become The World’s Largest PC Maker In Terms Of Units Sold.” (Stephen Grocer, “The HP/Compaq Union, From Controversy To Success,” The Wall Street Journal’s Deal Journal, 8/16/07)
HP’s And Compaq’s “Rigorous Pre-Clearance Integration Planning” Was So Successful That “Many Issues And Problems That Typically Hinder The Effectiveness Of Large Acquisitions Were Resolved Much More Easily” Than Expected. “One of the best things that HP did early on, according to [Robert] Burgelman [,the Edmund W. Littlefield Professor of Management at the Graduate School of Business]. Burgelman, was to engage in rigorous integration planning while waiting for the courts and regulatory authorities to approve the merger. Eventually, more than 1,500 people worked full time on this effort to set goals — both short- and long-term; define exactly how the new organization and related decision-making processes would work; and develop comprehensive operational plans for upcoming operational and strategic integration phases. Indeed, ‘the integration planning process was so successful that on the day the merger was approved, the new company was ready to go,’ says Burgelman. And because of this rigorous pre-clearance integration planning, many issues and problems that typically hinder the effectiveness of large acquisitions were resolved much more easily than most skeptics had expected. The short-term goal of cutting $2.5 billion from operations was exceeded by more than $1 billion. And short-term market-share losses were lower than expected.” (Alice LaPlante, “Compaq And HP: Ultimately, The Urge To Merge Was Right,” Stanford Graduate School Of Business, 6/1/07)
The HP And Compaq Merger, “Turned Out To Be A Sensational Combination, Whether Measured By Market Share, Market Leadership Or Increased Shareholder Value.” (Ben Rosen, “The Merger That Worked: Compaq And Hewlett-Packard,” Huffington Post, 5/25/11)
“Most Industry Observers Agreed That Fiorina Had Done A Good Job In Dragging – Sometimes Painfully – HP From A Slow-Moving And Consensus-Oriented Culture Into A Leaner And More Nimble Organization That Could Better Compete In The Fast-Changing Tech Arena.” (Clint Swett, “Fiorina Forced Out,” Sacramento Bee, 2/10/05)
“You Look Back Now And Carly Was Right.” “You look back now, and Carly [Fiorina, former HP CEO] was right – there was a lot of synergy between the two companies,” Tommy Wald, CEO of White Glove Technologies in Austin, Texas, said. “The merger worked out well in retrospect. I think they turned the combined company into a strong channel company, which is what we were all concerned about as partners.” (Rob Wright, “The HP-Compaq Merger: Partners Reflect 10 Years Later,” www.crn.com, 9/8/11)
Former HP Board Member Tom Perkins: “The Merger Was A Brilliant Move. Look Where HP Is Now: The Biggest Computer Company In The World.” (Robin Abcarian, “Profits May Not Equal Success,” Los Angeles Times, 5/20/10)
Current HP CEO Meg Whitman: “I Think The Compaq Acquisition Was The Right Thing.” “I’ve said before, I think the Compaq acquisition was the right thing. We have the position that we have today in PCs and in servers thank you to the Compaq acquisition…And [Carly Fiorina] drove that….I think it was the right thing with 20/20 hindsight, looking back, I’m glad we have the position we have in those two businesses because fundamentally now they are the bedrock of HP Inc and Hewlett-Packard Enterprise.” (Meg Whitman, “Charlie Rose,” PBS, 11/3/15)
Mark Hurd, “Can Thank His Predecessor, Carly Fiorina, For HP’s Breath And Depth.” “He’s also pushing the notion that customers need not shop anywhere else for their computing, printing, and tech services needs. He can thank his predecessor, Carly Fiorina, for HP’s breadth and depth. She was the architect of the tumultuous 2001 acquisition of Compaq.” (Adam Lashinsky, “Mark Hurd’s Moment,” Fortune, 3/16/09)
