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Merger of Hewlett Packard and Compaq

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A recent merger of note is that of Hewlett Packard and Compaq Computers. When the merger was announced, it was widely criticized as not making 'economic sense.' Use the material in Managerial Economics to analyze the reasons for and against the merger, and to assess the performance of the consolidated company since its completion.

The merger continued to be in the news for months, and the CEO of the merged company, Carly Fiorina, was relieved of her duties on February 9, 2005.

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A recent merger of note is that of Hewlett Packard and Compaq Computers. When the merger was announced, it was widely criticized as not making 'economic sense.' Use the material in Managerial Economics to analyze the reasons for and against the merger, and to assess the performance of the consolidated company since its completion.

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The HP Compaq merger made lot of economic sense for the combined or merged entity. Let us evaluate the reasons in favor of the merger. First of all, the merger provided a strong "competitive advantage" to the combined entity primarily due to the sheer size and scale of operations and market reach of the combined entity. The combined market power of the two individual organizations in the merged entity would provide significant market share and reach and huge market dominance in the marketplace.

Further, another major economic rationale was cost reductions due to synergies that would occur due to combined manufacturing, sales and marketing capabilities of the two companies. The merger would create a full service technology firm capable of providing everything from PC's to printers.

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Solution provided by:
Sheetal Jain, PGDM
Education
  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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