HP-Compaq FAQ

What's the deal? HP and Compaq on Sept. 3. announced an agreement to merge. Based on figures reported for the past four quarters, the combined company would have annual sales of $87.4 billion and operating income of $3.9 billion. That's slightly less than industry leader IBM's total sales of $90.1 billion in the past four quarters.

Who will run the new company? HP Chairwoman and CEO Carly Fiorina, 47, will hold the same positions in the combined company. Compaq Chairman and CEO Michael Capellas, 46, will be president of the new company.

The new HP will be structured around four operating units: Imaging and Printing will be led by Vyomesh Joshi, who is now president of Imaging and Printing Systems at HP; the Access Devices unit will be led by Duane Zitzner, who is now president of Computing Systems at HP; the IT Infrastructure business, encompassing the server, storage and software divisions, will be led by Peter Blackmore, who is now executive vice president of Sales and Services at Compaq; and a services business with approximately 65,000 employees in consulting, support and outsourcing will be led by Ann Livermore, who is now president of HP Services.

How many employees will the new company have? Initially, the combined company will have 149,000 employees, but HP expects to cut some 14,000 workers.

Where will its headquarters be? The new company will be located in Palo Alto, Calif., where HP has its headquarters now. However, the company indicated that it would retain a strong presence in Houston, site of Compaq's headquarters.

What's the value of the deal? Compaq shareholders will receive 0.6325 of a newly issued HP share for each share of Compaq they hold. HP shareholders will own approximately 64% and Compaq share owners 36% of the merged company. Initially, HP, offering $2.41 over Compaq's Aug. 31 closing price of $12.35, valued the deal at $25 billion. But investors reacted badly to news of the deal, and stock prices for both companies dropped dramatically last week, then rose slightly on Thursday and Friday. By midday Friday, stock prices were $17.77 and $10.39 per share for HP and Compaq, respectively.

What happens next? HP expects to close the deal in the first half of next year. By laying off employees and trimming redundancies in the two vendors' product lines, HP expects to save $2 billion in fiscal 2003. The Compaq brand will essentially disappear.

- Compiled by Jennifer DiSabatino

Copyright © 2001 IDG Communications, Inc.

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