hp6

Five years after - A results-oriented analysis of the HP-Compaq merger from IDC Nov 02, 2006 In early September 2001, Hewlett-Packard (HP)and Compaq announced plans to merge. At the time, IDC predicted the two companies would be better off together in a logical response to the forces of hardware commoditization and industry consolidation that were already underway. In the five years since the announcement, the two companies have successfully completed a massive integration effort and moved the combined company forward to new revenue and profit levels. A new study fr om IDC looks at how HP and C ompaq met the chal lenges of integrati on and the progress the company has made since the merger was formalized in May 2002. As with any merger, the two companies faced the significant hurdles of blending product lines and creating a new corporate culture. Ironically, it was that latter that helped the company to focus its product development efforts and avoid further investment in products without a clear roadmap forward. "What makes the merger interesting from a technology perspective is the extent to which HP has actually improved its position in a number of core markets that were rapidly commoditizing," noted Crawford Del Prete, senior vice president of Communications, Hardware, Services and Software Research at IDC. "The merger came at a time when both companies were becoming irrelevant in a number of key product categories. By completing the deal when it did, HP managed to position itself for the next wave of enterprise computing by leaping ahead of the trends that were working against the two companies as independent entities." An important li nchpin to the merger's success was the commitment to infrastructure sof tware, which helped move the company away from commodity hardware and into the management layer. OpenView gave HP a foundation from which to build in the software business, putting the company in a stronger position to compete with the largest system and services providers worldwide. Equally important was the company's commitment to cultural change, where it was hoped that the infusion of Compaq's fast-paced corporate culture would help increase HP's "business velocity." The initial integration efforts greatly benefited from Compaq's "adopt-and-go" approach, although some product and management decisions came at a high cost. Organizational changes have remained a critical issue, however, as HP had reduced the size of its workforce, experienced the departure of two CEOs, and reorganized its management structure. Over the past five yea rs, HP has successfully transformed itself into a company capable of delivering both volume products and value products, which gives it entry to more markets than many of its competitors. However, HP's transformation is not yet complete and challenges lie ahead. Among these are the ongoing need to reduce the complexity of its solutions, to expand its software business, to clarify its strategy in the services business, and to leverage underutilized assets in the consumer market. "The merger accomplished what HP and Compaq set out to do in the first place - it provided the critical mass and reach needed to ensure a long-term role in an industry that is undergoing a fundamental transition," said Jean S. Bozman, research vice president in IDC's Worldwide Server group and co-author of the report. "This deal enabled the merged company to grow revenue and profits in an increasingly competitive marketplace."

Upload: prashantgorule

Post on 14-Apr-2018

216 views

Category:

Documents

0 download

Report

Download

Embed Size (px):

TRANSCRIPT

Five years after - A results-oriented analysis of the HP-Compaqmerger from IDCNov 02, 2006

In early September 2001, Hewlett-Packard (HP)and Compaq announced plans to merge. At thetime, IDC predicted the two companies would be better off together in a logical response to theforces of hardware commoditization and industry consolidation that were already underway.

In the five years since the announcement, the two companies have successfully completed amassive integration effort and moved the combined company forward to new revenue and profitlevels.

A new study from IDC looks at how HP and Compaq met the challenges of integration and theprogress the company has made since the merger was formalized in May 2002. As with anymerger, the two companies faced the significant hurdles of blending product lines and creating anew corporate culture. Ironically, it was that latter that helped the company to focus its productdevelopment efforts and avoid further investment in products without a clear roadmap forward.

"What makes the merger interesting from a technology perspective is the extent to which HP hasactually improved its position in a number of core markets that were rapidly commoditizing," notedCrawford Del Prete, senior vice president of Communications, Hardware, Services and SoftwareResearch at IDC. "The merger came at a time when both companies were becoming irrelevant ina number of key product categories. By completing the deal when it did, HP managed to positionitself for the next wave of enterprise computing by leaping ahead of the trends that were workingagainst the two companies as independent entities."

An important linchpin to the merger's success was the commitment to infrastructure software,which helped move the company away from commodity hardware and into the managementlayer. OpenView gave HP a foundation from which to build in the software business, putting thecompany in a stronger position to compete with the largest system and services providersworldwide.

Equally important was the company's commitment to cultural change, where it was hoped that theinfusion of Compaq's fast-paced corporate culture would help increase HP's "business velocity."The initial integration efforts greatly benefited from Compaq's "adopt-and-go" approach, althoughsome product and management decisions came at a high cost. Organizational changes haveremained a critical issue, however, as HP had reduced the size of its workforce, experienced thedeparture of two CEOs, and reorganized its management structure.

Over the past five years, HP has successfully transformed itself into a company capable of delivering both volume products and value products, which gives it entry to more markets thanmany of its competitors. However, HP's transformation is not yet complete and challenges lieahead. Among these are the ongoing need to reduce the complexity of its solutions, to expand itssoftware business, to clarify its strategy in the services business, and to leverage underutilizedassets in the consumer market.

"The merger accomplished what HP and Compaq set out to do in the first place - it provided thecritical mass and reach needed to ensure a long-term role in an industry that is undergoing afundamental transition," said Jean S. Bozman, research vice president in IDC's Worldwide Server group and co-author of the report. "This deal enabled the merged company to grow revenue andprofits in an increasingly competitive marketplace."